Slow Progress Greece Struggles to Make Necessary Reforms

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Part 2: Politicians Benefit from the Existing System


Sitting in his Athens office again, Karkatsoulis leans back in his chair and says: "If I host a picnic in the forest and want to be sure I am complying with current fire safety regulations, I have to contact 11 different government agencies or officials." They include the Defense Ministry, the air force, the Culture Ministry and, finally, the local forest ranger.

The Greek central administration comprises a grand total of about 23,000 different responsibilities: rules, restrictions, prohibitions. The organizational charts lying on Karkatsoulis's desk are complex and confusing, like intricate sewing patterns. It is hard to believe how many agencies have to cooperate so that, for example, the natural gas company on the list can be sold.

In addition, the responsibilities in the governmental structures are constantly changing -- an average of 1,140 times a year, as Karkatsoulis has learned. Very few people, if any, know exactly who is responsible for what.

It's "lunacy," says Karkatsoulis, speaking in German. He studied law in the western German city of Bielefeld when the prominent German sociologist Niklas Luhmann taught there. Luhmann's system theory dominates his way of thinking, says Karkatsoulis.

The fact that, when it comes to competitiveness, Greece is regularly near the bottom of the World Bank's "Doing Business" index could be because there are 120 different ways to establish a new company. Karkatsoulis pulls out a diagram that looks like a game board. It shows that the same process takes six months in Greece and only five days in Bulgaria.

There are some very capable civil servants, says Karkatsoulis. "We're not Africa," he adds, noting the problem is of a political nature. Politicians, he says, don't want to change anything because they benefit from a system that made them powerful in the first place.

Inventing New Taxes

"No one likes to saw away at the branch they're sitting on," says Efi Stefopoulou, 40, who is in charge of strategic planning at the Interior Ministry. She spent almost two years working on a regulatory law designed to disentangle overlapping responsibilities in different ministries. It has not been ratified to this day. The troika helped her by offering suggested improvements, she says, but the ministers promptly revised the suggestions.

Stefopoulou believes that new wealth is one reason for the country's plight. When it joined the euro zone, money and low-interest loans started coming in, and attempts to introduce reforms were dropped. Why reform the tax system if the EU billions were flowing "just like that," asks Stefopoulou.

Former Prime Minister Georgios Papandreou had already characterized tax reforms as especially urgent. The parliament has already passed the 10th tax law since October 2009, and yet the rich and the superrich still owe the government at least €60 billion. A bilateral treaty with Switzerland, which is intended to gain control over tax flight, still hasn't been ratified.

Meanwhile, the government is resorting to inventing new taxes. Entire municipalities are complaining about the so-called charatzi, a new special tax on real estate ownership that was simply added to electricity bills. Tenants in multifamily buildings agreed to disconnect their electricity temporarily in protest.

Two public prosecutors for white-collar crime, who complained about political interference in their investigations, now face the possibility of a criminal trial. They are accused of not having gone public with their complaint early enough. It sounds like something worthy of Kafka.

Lack of Authority

Last week, Prime Minister Papademos invited the press to his residence in the affluent Athens neighborhood of Kolonaki; the Greek press on one evening and the foreign press on the next. Both times he stood between oil paintings of naval battles, bathed in elegantly dimmed light, and both times he said that the most important thing is to move forward with reforms, especially administrative reforms.

Papademos is popular because he is not a politician or a populist. He is not seen as power-hungry, like Antonis Samaras, the head of the conservative New Democracy party. He also didn't "inherit" his office, like Georgios Papandreou, the son of PASOK founder Andreas Papandreou, who helped establish the crippling state system. Papademos is an economist and a technocrat, and people have faith in his crisis management abilities.

"But for structural reforms one needs structures," says reformer Karkatsoulis. But those structures, he adds, "tend to be complicated." No matter how much integrity Papademos has both personally and as prime minister, says Karkatsoulis, he cannot change the fact that he, as "the center of government, has neither the authority nor the capacity" to impose a common policy on his ministers, as the OECD report states.

And what is the status of the administrative reforms?

Some 150,000 public-sector jobs are supposed to be eliminated by 2015, with 30,000 originally slated for elimination in 2011. In reality, 6,000 civil servants and other employees have lost their jobs, says Karkatsoulis. Mostly, he adds, they are people who would have gone into retirement anyway.

Translated from the German by Christopher Sultan

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tnt_ynot 01/17/2012
1. Dracma time
Isn't it Drachma time? The greek people need to save themselves with arms length help from the EU. The Euro is too great a burden for the uncompetitive nation. What they are experienced is unworthy. The way out is at: http://euro-meltdown.blogspot.com/ Anthony
poliman 01/21/2012
2.
Very reason that Greece in this situation is why Greeks will not be impliment the reforms needed. Political and social culture is not able to handle such change in grassroots level. I am afraid it is time for Greek treasury to bring out the Drachma plates from the secret vaults. It is time to print.
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