Despite Financial Woes, Greece’s Business Climate Has Improved

June 29, 2015
greece business climate
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By Ana Maria Santacreu, Economist

Decisions made regarding Greece over the next few weeks will determine whether Greece will enter what Mario Draghi has called an “unchartered territory.”1 While Greece’s finances continue to receive considerable attention, the country has made several attempts at reform to varying degrees of success. One area in which Greece has made significant progress is improving its business climate.

Since 2010, Greece’s reforms have included:

  • Reducing its government deficit by reducing its public sector (via laying off public employees and cutting government spending) and increasing taxes
  • Reforming the labor market
  • Reducing wages to make the country more competitive

These measures have been very unpopular, causing dissatisfaction among the people in Greece and resulting in a new political landscape in the country.2

However, other structural reforms have been aimed at increasing the medium-term prospects of growth in Greece, and these reforms have resulted in significant advances in terms of improving the business climate. One way to assess the success of these measures is to look at the Doing Business indicators of the World Bank.3

Greece ranked No. 61 out of the 189 countries ranked by the World Bank in 2015.4 However, Greece has improved its position significantly. The Doing Business 2010 report had Greece ranked No. 109 out of 183 countries for ease of doing business.5 Greece advanced four positions last year alone. According to the 2015 report, the biggest improvements between 2014 and 2015 have been on:

  • Starting a new business: The number of days needed to open a business today in Greece is one-third of what it was 10 years ago, and the cost as a percentage of income per capita has gone from 32.5 percent to 2.2 percent.
  • Registering property: Greece reduced the property transfer tax and removed the requirement for the municipal tax clearance certificate, making property transfer easier.   
  • Trading across borders: Greece has introduced electronic submission of custom declarations for exports that facilitates trade.

The areas in which Greece’s position has fallen relative to other countries are:

  • Getting credit: Greece still scores lower than many countries in legal rights for borrowers and lenders.
  • Paying taxes: Greece increased the corporate income tax rate.

These areas were also reflected in the opinions of business leaders, as captured in the Global Competitiveness Report of 2013-14. This report said aspects that still generate a bad climate for doing business in Greece include tax rules and regulations, policy instability, and limited access to financing.

Reforms in these areas are important and still remain a challenge for Greece. Should these reforms occur, they might help promote growth in the medium term and help the country increase income via investment and exports, which could potentially facilitate debt repayment.

Notes and References

1 Spiegel, Peter. “Greek debt crisis: Key dates on the road to a possible Grexit.” Financial Times, June 22, 2015.

2 Haliassos, Michalis. “Greece: Are we missing the reform opportunity of the crisis?VOX, June 20, 2015.

3 The Greece profile sums up the Doing Business report thusly: “Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in regulations affecting 11 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labor market regulation.” “Doing Business 2015: Going Beyond Efficiency: Economy Profile 2015 Greece,” World Bank, 2014.

4 Out of the high-income Organization for Economic Cooperation and Development countries, Greece is in the last place.
Doing Business 2010: Reforming through Difficult Times,” World Bank, 2009.

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This blog offers commentary, analysis and data from our economists and experts. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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