How bad is the Greek bureaucracy?

by on May 29, 2010 at 4:08 am in Economics, Law | Permalink

Canadian entrepreneur Steve Earle traveled to Greece with plans for what he hoped would be a flourishing business in a sunny, island-rich nation: a sea-plane airline.

But Mr. Earle's company, AirSea Lines, went bust five years later in 2008–hindered in large part, he says, by government bureaucracy. "They killed it by inertia," he says. "Greece is an unsustainable reality."

AirSea's odyssey illustrates one of the key problems preventing Greece from generating the economic growth it needs to pay off its heavy debts: Critics say a sprawling civil service has tried to secure its own survival through an opaque patchwork of fees, taxes and red tape. The European Commission estimates the administrative burden of Greece's bureaucracy–the value of work devoted to dealing with government-imposed administration–is equivalent to 7% of gross domestic product, twice the EU average.

There is much more here.  By the way, here is a new blog on the Greek financial crisis, in both Greek and English.

Alex F May 29, 2010 at 6:01 am

I’m confused, I clicked through to the article and it sounded like the bureaucracy wasn’t a problem at all. In the first few years he had to get a variety of local permits, since “there was no [federal] law governing the operation of seaplanes or clear regulatory authority”. (If anything, this sounds like the problem is the lack of a central bureaucracy, rather than an overabundance of local bureaucracies). Then he got the permits. He ran the business for a few years, and he was just starting to turn a profit when the financial crisis hit and his investors withdrew.

Look, I don’t doubt that Greece has a terrible growth-destroying bureaucracy, but this is just a terrible article which doesn’t give a shred of evidence to support its thesis.

dearieme May 29, 2010 at 6:49 am

Look, why don’t we just sell it to Turkey?

Andrew May 29, 2010 at 8:44 am

I’m not saying that definitively red tape killed his business. How could I know? A business is a door, a shingle and a shyster.

Sometimes businesses fail. They often fail during recessions (I won’t get into government dinking with the money supply). A company in year 5 shouldn’t necessarily need to rely on investors to keep the doors open. If previous costs put them in that position, and if bureaucracy was a significant portion of those costs then yes it is to blame and the recession was simply the catalyst. Recessions come. If it wasn’t this one it would be another one.

This is one problem with government dinking. We still don’t know whether he actually had a good business or not.

E. Barandiaran May 29, 2010 at 9:10 am

I would say about the Greek bureaucracy and Greece’s government what Chris Matthews said a couple of days ago about U.S.A.’s bureaucracy and government:

“. . . this idiotic cerebral meritocracy has got to step aside and let the people who do things take over†¦†

FYI, Matthews is an Obama’s devotee that works as TV commentator.

Bill May 29, 2010 at 10:27 am

One other comment: I wouldn’t necessarily measure the Greek economy by the amount of Foreign Direct Investment relative to the Bulgarian economy. Greece may have wealthy individuals who can invest and are competitors to FDI, and Bulgaria probably has little existing domestice savings and does not have as mature an economy as Greece. I don’t know about using FDI as an indicator in all contexts.

Bill May 29, 2010 at 11:52 am

E. Barandiaran, No tears for the one who feeds the pig, either, and if they did know what they were lending to, and lent thinking they would be bailed out, double no tears. They are big boys and knew what they were getting into, and concervancy in lending would have brought about change earlier, not later, and not as a surprise to the people.

I would not disagree with your other statement however: “Thus, at this time I assume that only the Greek government (including elected officials and MPs, and the bureaucracy) is responsible for the country’s fiscal crisis.”

People make the bed they sleep in. Just as I doubt it was wise fiscal policy in the US to do a ten year deficit tax cut with unfunded wars.

Bill May 29, 2010 at 12:42 pm

What is more interesting than bureaucracy–and don’t get me wrong, mindless unproductive regulation is stupid–but rather the protection of businesses in Greece from competition: see this article, in a later edition of the WSJ, on how protection of businesses–pharmacies and trucking companies and greek owned cruise lines– and labor unions are impeding Greece’s development:

http://online.wsj.com/article/SB10001424052748704635204575242542498580652.html?mod=WSJ_hps_LEFTWhatsNews

minderbender May 29, 2010 at 2:41 pm

Steve Earle was so amazing on The Wire.

George J. Georganas May 29, 2010 at 3:50 pm

A critical piece of evidence is missing from this discussion:
At the same period of time Mr Earle was having those problems, a Greek private airline, Aegean Airlines was doing fine, both inside Greece and outside on many very competitive routes. At the same time, ex-flag carrier state-owned Olympic Airlines was collapsing in slow motion. Blaming the bureaucracy fo seven years ago cannot really explain failure today.
Mr Earle’s point of view is understandable. Less so that of the reporters who chose not to research the story a little.

Nicolaos May 31, 2010 at 5:52 pm

I’m Greek.
I can tell you first hand what’s going on here.
YES!Bureaucracy is the biggest threat for new investments.It is so vast and so time (and soul) consuming that in the end you feel like you can’t be bother any more.
Most greek agencies takes weeks just to give you an answer about the legislation on your investment.What’s more on that, you’re not even sure if this legislation is pan-hellenic among agencies.
To make it simpler.You go to a public agency and ask:what do i need to do this,and what’s the legislation about it.
Answer: a,b,c,d,maybe e,probably f,not sure though about g.
You go to another agency relative to your investment.Same question.
Answer: e,f,not sure about a,definetlly not c for sure g.(b has disappered).
We have sooo many laws,even our lawyers don’t know for sure what to do.
In the end you give up,forget the investment and you get a job as a public employee.

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