1

Product Market Regulation and Competitiveness:

Towards a National Competition and Competitiveness Policy for Greece

Yannis Katsoulacos1 Christos Genakos

2 George Houpis

3

AUEB AUEB, CEP & CEPR Frontier Economics

April 20154

Abstract

This chapter examines the competitiveness of product markets in Greece. One of the main

determinants of competitiveness is the quality of the set of rules and regulations that govern

the operation of markets. These should promote competition, investment and

entrepreneurship. Heavy and low quality regulation is generally associated with greater

inefficiency and poor economic outcomes. We provide a summary of the Greek economy

competitiveness and of its evolution over time through the lenses of various internationally

comparable indicators that cover a wide spectrum of aspects that affect or contribute to the

measurement of a country’s competitiveness. We demonstrate that product markets in Greece

are among the most heavily and mis-regulated markets of advanced countries, though the

reforms of the last four years seem to be having a positive impact. We then investigate in

greater depth the mis-regulation of product markets, identifying a number of responsible

factors and discussing a number of case studies. We make the case for a National

Competition and Competitiveness Policy plan to improve the regulatory institutions and

reduce regulatory burden. Finally, we look at the successes and failures of regulatory reform

history in two very important markets: energy and telecommunications.

1 Department of Economics, Athens University of Economics and Business, E: katsoul@aueb.gr, U:

http://www.aueb.gr/users/katsoulacos/ 2 Department of Economics, Athens University of Economics and Business, CEP and CEPR, E:

cgenakos@aueb.gr, U: http//www.aueb.gr/users/cgenakos/ 3 Frontier Economics, E: george.houpis@frontier-economics.com, U: http://www.frontier-

economics.com/europe/en/people/6/ 4 We have benefited from discussions with Dimitris Vayanos and Nikos Vettas and from comments at the

Workshop on Reforming the Greek Economy Athens, May 27-28 2013 in which a preliminary version of the

paper was presented. We are also grateful to Galateia Makri for excellent research assistance. Katsoulacos

acknowledges research support from Bank of Greece, the Hellenic Federation of Enterprises and the Greek

Ministry’s of Education Program “Excellence in Research (ARISTEIA)”, Research Grant 2591 (CoLEG). The

opinions expressed in this paper are those of the authors alone and any errors or ambiguities are solely their

responsibility.

2

1. Introduction

The focus of this paper is on the product markets in Greece and how to restore their

competitiveness. One of the main determinants of competitiveness is the quality of the set of

rules and regulations that govern the operation of markets. These should promote

competition, investment and entrepreneurship. Regulations that are well-designed, suitably

applied and effectively enforced can make a country competitive and prosperous.

Greece’s low competitiveness is not due to a lack of regulations. Indeed, the Greek economy

is very heavily regulated. As we will demonstrate in the next sections the Greek product (i.e.,

goods and services) markets are the most heavily regulated among OECD countries. Heavy

regulation is generally associated with greater inefficiency and poor economic outcomes (see,

for example, Nicoletti, et. al., 1999; Blanchard, 2004). Many of the regulations create serious

obstacles for competition, investment and entrepreneurship, and should be abolished.

Deregulations that promote competition have a positive impact on productivity through a

more efficient use of resources (Nickell, 1996; Blanchflower and Machin, 1996; Bloom, et.

al., 2012), by making entry of new firms easier (Van Wijnbergen and Venables, 1993;

Bloom, et. al., 2012) and by incentivising firms to innovate (Blundell, et. al., 1999; Aghion,

et. al., 2005). At the same time, important regulations, such as Competition Law and network

industry regulation that could promote the good operation of markets are not enforced

effectively in Greece.

However, precisely because the Greek economy is heavily and inefficiently regulated, there

are large benefits to reap from regulatory reform. According to one OECD study (Scarpetta

and Tressel, 2002), a comprehensive regulatory reform alone could raise the competitiveness

of the Greek economy and ultimately the incomes of Greek citizens, by more than 15%.

Similarly, model based calibration work carried by IOBE (2014a) indicated that reforms

related to the liberalization of the markets and the enhancement of competition will boost

Greece’s GDP by 1.7% during the first year and by up to 7.8% in the long run. Finally,

OECD (2014) in a recent competition assessment of laws and regulations in just four sectors5

of the economy identified 555 problematic regulations and 329 provisions “where changes

could be made to foster competition” and it estimated the benefits from enhanced competition

arising through “rising expenditure, increased turnover and lower prices for the Greek

5 The sectors were: food processing, retail trade, building materials and tourism.

3

consumer at around EUR 5.2 billion, or around 2.5% of GDP”6. Therefore, there is

unanimous agreement that the potential effects for Greece of reforms in product markets on

employment, output, productivity and competitiveness are sizable.

This paper is organised as follows. Section 2 provides a brief summary of the Greek economy

competitiveness and of its evolution over time through the lenses of various internationally

comparable indicators that cover a wide spectrum of aspects that affect or contribute to the

measurement of a country’s competitiveness. Section 3 investigates in greater depth the mis-

regulation of Greek markets, identifying a number of responsible factors and discussing a

number of case studies. Section 4 makes the case for a National Competition and

Competitiveness Policy plan to improve the regulatory institutions and reduce the regulatory

burden. Section 5 looks at issues related to the regulation of and the successes and failures of

reforms in two very important markets: energy and telecommunications. The final section

offers concluding remarks.

2. The Competitiveness of the Greek Economy and its Evolution

For at least two decades leading up to the wake of the economic crisis in 2009, Greece has

been steadily losing its competitiveness vis-à-vis other EU and OECD countries. This

negative trend seems to have halted following the reforms implemented under the Economic

Adjustment Program and in many cases there is clear evidence of a slow but steady

improvement. In this section we briefly review various indicators that quantify the decline

and the rise in the competitiveness of the Greek economy with an emphasis on product

market regulations and the business environment7. To this end, we utilise data from three

international organizations: the World Economic Forum, the World Bank and the OECD8.

The World Economic Forum is an independent international organisation that publishes the

Global Competitiveness Report for over 30 years. The World Economic Forum has based its

competitiveness analysis on the Global Competitiveness Index (GCI): this is a comprehensive

6 OECD (2014), “OECD Competition Assessment Reviews: Greece”, p.3.

7 For more detailed discussion see Katsoulacos and Makri (2013).

8 Various components of these indicators are based on “soft data”, collected from questionnaires, thus reflecting

the respondents’ attitudes and opinions. Hence, these indicators incorporate a great deal of subjectivity, which

might not be fully comparable across countries. However, there is a common pattern that emerges from the

evolution of these indicators and this is what we focus on.

4

tool that measures the microeconomic and macroeconomic foundations of national

competitiveness. According to the GCI, competitiveness is defined as the set of institutions,

policies, and factors that determine the level of productivity of a country. The level of

productivity not only sets the level of prosperity but also determines the rates of return

obtained by investments in an economy, which in turn are the fundamental drivers of its

growth. In other words, a more competitive economy is one that is more likely to achieve

sustainable growth.

The GCI is based on a weighted average of many different components that are grouped into

twelve pillars. Figure 1 shows the evolution of Greece’s overall competitiveness ranking

between 2001 and 2014.9 The increase in the index means that the relative competitiveness of

the Greek economy has been steadily declining, with a particularly accelerated pace since

2005. The decline seems to have peaked in 2012. Since then there is a strong opposite trend

with Greece improving its rank position.

Figure 1: World Economic Forum - The Global Competitiveness Index

Source: World Economic Forum, 2001-14.

9 Note that the number of countries included in the report varies from year to year (the average number is

approx. 133 countries), so any time series comparisons should be viewed cautiously. Even though most high-

income countries were included from the start of this index, it is not self-evident that any changes in the number

of countries should improve Greece’s position in the ranking. If a more competitive country (even of lower

income) drops out of the sample, the position of Greece will indeed improve. Greece’s position will deteriorate

if such a country is introduced in the sample. Furthermore, entry or exit of a country less competitive then

Greece would not affect Greece’s position, given that the ranking here reflects the absolute position of the

country and not its percentile rank. Nevertheless, these indices are widely used and the trend for Greece is so

clear and strong than these other factors are likely to be only secondary.

5

Looking at some of the relevant subcomponents of this index, it is interesting to note that

Greece’s ranking has been declining mainly due to the deterioration of the relevant efficiency

of the goods market and its institutions in general. As we can see in Figure 2, both of these

indices have experienced a strong decline since 2006. If we add to this the already low

efficiency of the labour market, one can begin to understand the truly disastrous combination

that led to the decline of Greece’s competitiveness over these years. This also highlights that

although the product and labour markets are closely interlinked, the inefficiencies of the

product market seem to exert an independent negative effect on the economy’s overall

efficiency. Again though, since 2012, all indices seem to steadily improve as a result of the

changes in legislation.

Figure 2: The Global Competitiveness Index – Goods and Labour markets and institutions

Source: World Economic Forum, 2006-14.

Considering further Greece’s performance in “Goods Market Efficiency” it is worth

examining the two sub-indices of “Intensity of Local Competition” and “Effectiveness of

Anti-Monopoly Policy”, that are particularly relevant to the discussion in this Chapter (see

Figure 3). With respect to both of these sub-indices Greece’s relative performance has been

very low and has deteriorated rapidly – especially with respect to the second sub-index in

which it ranked 36th

in 2006, ranks 83rd

in 2011 and 92nd

in the latest 2013-14 report. On the

contrary, the crisis seems to have ignited a stronger local competition, as from 95th

in the

ranking in 2012, Greece has improved to the 71st position.

6

Figure 3: The Global Competitiveness Index – Intensity of Competition and Effectiveness

of Anti-Monopoly Policy

Source: World Economic Forum, 2006-14.

In addition, important aspects of the business environment such as the business sophistication

or the innovation capabilities of firms in Greece have also experienced a strong decline, as

demonstrated in Figure 4. The negative impact of an overregulated business environment is

also reflected in the extremely low “FDI and Technology Transfer” rankings. Again though,

since 2012 Greece seems to slowly but steadily improve its position.

Figure 4: The Global Competitiveness Index – Business Sophistication, Innovation and FDI

Source: World Economic Forum, 2006-14.

7

The second set of indicators comes from the World Bank. The first is from the “Doing

Business” report that presents quantitative indicators on business regulations and the

protection of property rights that can be compared across 185 economies. These regulations

affect eleven areas of the life of a business: starting a business, dealing with construction

permits, getting electricity, registering property, getting credit, protecting investors, paying

taxes, trading across borders, enforcing contracts, resolving insolvency and employing

workers. Based on the 2011 report, Greece was ranked 109th

among 183 countries, down

from the 80th

position in 2006. According to the report, among the most problematic factors

for doing business was the inefficient government bureaucracy, access to finance, policy

instability, tax regulations and corruption. In contrast, the latest report ranks Greece in the

72nd

position, again reversing the trend of the previous years.

The second indicator from the World Bank is the Worldwide Governance Indicators (WGI)

that reports aggregate and individual governance indicators for 215 economies over the

period 1996–2011, for six dimensions of governance: voice and accountability, political

stability and absence of violence, government effectiveness, regulatory quality, rule of law,

and control of corruption. Complementary to the “Doing Business” report, these governance

indicators in Figure 5 again highlight the overall poor (the index is in percentile rank terms

from 0 to 100, with higher values corresponding to better outcomes) regulatory framework in

Greece and its decline over time (Regulatory quality ranking), as well as the decreasing

government effectiveness and particularly the low and declining ranking in corruption and the

general rule of law compared to the average from the other OECD countries.

Figure 5: The World Bank – Worldwide Governance Indicators

8

Source: World Bank, Worldwide Governance Indicators.

Last, but not least, every five years the OECD publishes the Product Market Regulation

(PMR) indicator that again tries to quantify the quality and restrictiveness of the product

market regulation, various barriers to entrepreneurship and investment, as well as the amount

of state control in the economy. Figure 6 provides the respective scores for the last four

reports. The picture that emerges from this indicator as to the relative position of Greece is no

different from the previous evidence: heavy product market regulation, high state control and

large barriers to entrepreneurship with Greece lagging behind the OECD average, but

improving over time.

9

Figure 6: OECD – Product Market Regulation index

Source: OECD, Product Market Regulation Database

Therefore, the consistent picture that emerges from all these indicators regarding the state of

the Greek economy before the crisis is very clear: high barriers of entry, heavy state control,

inefficient regulatory framework and very restrictive product market regulation, all of which

naturally lead to less competition in product markets and the steady decline of Greece’s

overall competitiveness. In the more recent years since the beginning of the crisis, reforms

and changes in the legislation seem to be reversing these negative trends and Greece appears

to be gradually closing the gap with the other advanced countries. However, important

differences remain that indicate that the process of deregulation to reinvigorate the

competition in the internal product markets still has a long way to go.

3. Taking a Closer Look at the Mis-regulation of the Greek Product Markets

The critical element missing from Greek product markets is the lack of effective competition.

We believe that the main reasons behind this phenomenon are: (i) excessive and low quality

regulation of a very large number of markets resulting in a very high regulatory burden,

protected product markets and “closed” professions and (ii) inefficient implementation of

regulation, in those markets where this is necessary, in the form of competition law and

10

sectoral regulation, in order to improve market outcomes and social welfare.10

Excessive and

low quality regulation are the most important factors in restricting the intensity of

competition, hindering the growth of entrepreneurship and innovation, and deterring direct

foreign as well as domestic investment. Together with the inefficient implementation of

competition law and sectoral regulation, these are among the most important structural

problems that the Greek economy has to face in order to improve its competitiveness and to

be able to return to a high and sustainable growth rate. We briefly examine each of these

factors below, before making our policy recommendations.

(i) Excessive and low quality regulation in many markets

To get an idea of the multitude of laws produced by the Greek state we refer to a recent

OECD Report (2011) «Functional Review of the Central Administration in Greece».

According to this report the generation of regulations between 1995 and 2005 has been

exceptionally high. More precisely, there have been 3,430 laws, 20,580 presidential decrees,

114,905 ministerial decisions, 24,010 regional decisions and 8,575 decisions of municipal

authorities. All these total 171,500 new regulations or about 5,716 regulations per year (or

477 regulations per month) on average. Even if we do not take into account the regional

decisions and the regulations by municipal authorities, the number of regulations per year is

4,630 on average (or 386 regulations per month11

). Based on an OECD (2009a) cross-country

comparison study, not only there was a significant increase in new primary laws between

1997 and 2007, but Greece was the country with the highest new subordinate regulations

across all OECD countries.

Moreover, the regulations are often of very low quality due to the absence of the necessary

institutions and mechanisms which ensure that the regulations are necessary, proportional to

the problem for the solution of which they were created, and adopted after having assessed

their effects. As discussed in the previous section, Greece is in a very low position in all

indicators of all international organizations, which attempt to measure the quality of the

10 An equally important reason is also the fact that the state has a large presence in various product markets

through state-owned (or controlled) firms. The realisation that in most of these markets there was no need for

government intervention and that the state was, in fact, an inefficient producer that was distorting healthy

competition has led to a large scale reform and privatisation programme. We do not expand on this aspect, as

this topic is covered in another chapter of the book. 11

To be fair, not all these decisions are strictly speaking new regulations, since a number of those are simply

administrative. However, to the extent that the administrative related decisions stay roughly constant over time,

the sheer number of these decisions provides a very clear picture of the excessive administrative burden.

11

various aspects and dimensions of the regulatory environment and, more importantly, this

position was continually worsening during the last 10 years.

More specifically, the main cause of this situation is that in Greece there is no institutional

framework for the assessment of regulations which allocates responsibilities to suitably

organized and staffed institutions to examine existing regulations and abolish those that are

not necessary or create high social cost and to forbid the creation of new regulations which

are expected to yield this result. There is neither an authority for the Assessment of the

Effects of Regulations (AAER) nor any other institution or mechanism. The Law 4048/12 of

2012, aimed to improve the regulatory governance, proposed principles and procedures of

good regulation, but was never implemented and in any case did not propose the appropriate

organizational and decision-making structures and processes that are necessary to address the

problem in Greece, and was not concerned with the reduction of the existing (huge)

regulatory burden.

The details of the institutional framework for the assessment of the effects of regulations and

the institutional structure of the AAER vary from country to country. But in most/all

advanced countries there is a central unit or organization with the above key responsibilities.

In Australia, for example, a very important role is played by the independent Productivity

Commission. In the UK, the responsibility lies with a sub-group of the Cabinet together with

the independent Regulatory Policy Committee. In the Netherlands, the Advisory Board on

Regulatory Burden explicitly aims at reducing the regulatory burden as a key government

priority in order to improve the performance of the economy. In the U.S., with the most

extensive experience in assessing the effects of regulation, the Small Business Administration

Office of Advocacy has the powers of an AAER and reports directly to the President. We

return with a proposal for the Greek case based on international experience in section 4

below.

As a result of this excessive regulation, many product and service markets face distortions,

and/or unjustified protection from either internal or foreign competition, to the detriment of

Greek consumers and Greece’s international competitiveness. Conveying the depth and

breadth of the various rules and regulations applied to various product markets, as well as the

large degree of market fragmentation is truly daunting; however, we provide below various

case studies to illustrate this point. The list will be by no means exhaustive, just indicative.

12

Some case studies

Case Study 1: Trucks

The road freight transport sector, which accounts for 98% of transportation of goods by land,

had until recently one of the strictest regulatory frameworks in the OECD (OECD, 2001).

The government granted licenses to haulage operators (license for vehicle for public use) and

set minimum tariffs. No new licenses have been issued since the early 1970s which meant

that the only way to enter the sector was to purchase an existing license at a significant cost in

the secondary market, with prices varying between EUR 30,000 and EUR 300,000. The

restrictiveness of the legal framework for road freight resulted in high rents for incumbents,

inhibited competition, constrained the development of outsourcing of trucking services and

resulted in higher prices for almost all consumer goods. A new law in 2010, and subsequent

important amendments, liberalized the road freight transport sector; it also resulted in major

strikes by existing licence holders that brought the country to a halt. Few new licenses had

been issued due to the ensuing deep recession and large demand reduction; despite the new

laws the market is adjusting very slowly.

Case Study 2: Maximum markup regulation for fruits and vegetables

Fresh fruits and vegetables were sold under a maximum markup regulation, imposed both at

the wholesale and retail level. The typical government justification for imposing maximum

markups is consumer protection from the effects of excessive market power. In oligopolistic

markets, the main argument in favor of maximum markups is to trim the right tail of the

markup distribution, hence limiting the most extreme instances of exploitation of market

power. This is expected to put downward pressure on retail prices, without affecting firms

with smaller markups (e.g., a competitive fringe), though it entails a risk of creating a focal

point for potential collusion.

In June 2011 this regulation was hastily cancelled. Interestingly enough five fruit and

vegetable products (apples, lemons, mandarins, oranges, and pears) were excluded from this

regulation. Genakos et al. (2014) collected retail and wholesale data and compare prices of

products affected by regulation before and after the policy change and use the unregulated

products as a control group. They find that abolishing markup regulation led to 6 to 9 percent

lower average retail prices, which amounts to EURO 256 million per year aggregate savings

for Greek consumers. They provide consistent evidence demonstrating that markup ceilings

provided a focal point for collusion among wholesalers. Therefore, in this case deregulation

13

actually benefited consumers, even if the regulation in place was actually meant to protect

consumers.

Case Study 3: “Fresh” pasteurised milk

Greek legislation allows only pasteurized milk with a shelf life of up to five days to use the

word “fresh milk” on their packaging. Greece is the only EU country that regulates the shelf

life of milk in this way; EU regulation leaves the shelf life duration at the discretion of the

manufacturer provided that they abide by all relevant regulations regarding the safety of the

product. Due to the limited shelf life, importing “fresh” milk from other EU countries is

impossible. This protective environment means that there is limited competitive pressure at

all stages of milk production and as a result, Greek consumers are paying one of the highest

retail prices for “fresh” pasteurized milk across the EU (34% higher prices on average). Also,

consumers on (most) islands and remote mountainous villages do not have access to “fresh”

milk and small producers in northern Greece cannot reach the large urban areas. Moreover,

the five-day restriction creates an inefficient and costly system of collecting and returning

expired products from retailers, which amounts to 5% of the final retail price of “fresh”

pasteurized milk. Although the recent OECD (2014) report recommended abolishing the five-

day restriction, the final version of the law that was passed in 2014 only increased it from 5 to

7 days, as a result of strong opposition from local producers and the industry. Following this

change, the effects on the market so far have been negligible, as the threat of milk imports

from major EU producing countries is not a credible constraining factor and hence there is no

pressure to local producers to modernize and improve their productivity.

Case Study 4: Bread and Bake off

Until 1992, the price of a loaf of bread was regulated by the state. Since then, the government

lifted all geographic restrictions regarding the establishment of a new bakery and allowed the

sale of bread and bread products from other retail channels (non-bakeries, such as super

markets). However, licencing requirements to establish a bake off installation (a small oven

to bake ready-made bread rolls) inside a super market were very restrictive. Essentially, the

bureaucratic procedure to install a small oven was equivalent to an industrial installation. As

a result, most super markets could not sell bread and despite the “liberalization”, supply was

practically restricted only to bakeries. In 2004, the EU court condemned Greece for the very

restrictive regulation of the bake off. Subsequent changes in 2007 and 2010 made the law less

restrictive, but the requirements still do not allow every super market to offer bake off

14

services (minimum space and separation requirements etc.). The current law (2013) has eased

the restrictions, setting the same sanitary standards for every retail shop that wants to bake

and sell bread. The bakery sector nowadays is one of the most vibrant retail sectors.

Case Study 5: Stevedores and Lawyers

A variety of restrictions also applied to services. The government regulates various aspects of

many professions, such as setting the number of licenses, geographical restrictions, or

compulsory minimum fees etc. It is instructive to see how such regulations pertaining to two

professional activities at opposite ends of the educational spectrum function. In Greece

stevedores are commonly used for land and port operations (loading and unloading truck or

boats). Their fees were fixed by law (hence no price competition), and the Stevedore Work

Regulatory Committee acted as licensing authority, which meant that the incentives to allow

more workers into their profession were severely distorted. Instances of companies paying

fees to the Committee, despite not using their services, have not been unheard of.

New legislation in 2013 removed legal restrictions that existed in the past concerning the

determination of the number of stevedores in cities and ports, the number of stevedoring

operations contractors in each port, the setting of the remunerations of stevedores, as well as

geographical restrictions in practicing the profession. However, insufficient monitoring by

authorities means that the abolition of the previously existing restrictions and the

implementation of the new market rules set by the recently passed legislation is still an open

question. This is also one of the main reasons for the low level of recorded entries to the

profession of stevedore after the reforms (IOBE report, 2014b).

Lawyers also had a variety of restrictions. First, there were geographic restrictions of

practising law within Greece. If a lawyer was registered with the Bar association in Athens,

he/she could not appear in court in Thessaloniki or elsewhere in Greece. Second, there were

mandatory minimum payments and fixed payment scales for legal services. Third, there was

also mandatory involvement of a lawyer for real estate transactions and a mandatory payment

scale according to the value of the estate. All these restrictions meant legal services were not

competitive and their cost was unnecessarily high. Recent changes in the law (2013) meant

that the profession of lawyers has undergone many basic regulatory reforms that favor its

liberalization. However, there remain barriers to the exercise of the profession, with most of

them, but not all, closely related to fees and payments to the Bar Association (IOBE report,

2014c).

15

Case Study 6: Advertising fee

Greece is the only OECD country that imposes a very high tax on advertising: 20% for all

advertisements in the press and 21.5% for TV and radio. While from an economic perspective

this regulation acts as a tax on advertising, the term “advertising fee” is more appropriate

since the revenues are used to fund the health benefits and the pension fund of the employees

in media (newspapers, magazines, TV and radio stations) substituting their employer

contributions.

Imposing such a high fee means that the marginal cost of advertising is also very high. As a

consequence advertising expenditure will be low, hurting both consumers (less information,

less competition) and firms, since it acts as a tax on their business inputs and distorts their

optimal input mix. In addition, increasing the cost of advertising hurts advertising as a

business activity. Lower advertising expenditure means reduced revenue and fewer jobs for

the firms in the advertising business. Especially since the cost of tax collection falls to the

advertising agencies, as it is the case in Greece, the considerable resources that they have to

devote leads to higher operating costs, which means that small advertising agencies cannot

profitably survive, leading to higher concentration in this market. Finally, the higher cost of

advertising means extra cost to the producers of goods and services that will be, partly or as a

whole, incorporated into the final consumer prices. Based on the OECD (2014) report,

abolishing this fee is estimated to increase advertising expenditure by 35%, creating more

than 800 new jobs in the advertising business alone, while also to lower final prices by 1%,

which amounts to an estimated EUR 1.8 billion annual consumer benefit. So far, no changes

in the relevant legislation have taken place.

As this collection of case studies demonstrates, it is difficult to isolate a few common factors

that could easily be addressed in liberalizing product markets. Perhaps the only common

message from these cases is that product market deregulation in Greece is a long and

painstaking road. Changing the primary legislation is just the first step and the whole

deregulation procedure requires careful monitoring and continuous assessment. Just as we

need careful ex-ante argumentation for policy reforms, we also need to create a strong culture

of ex-post policy evaluations12

to learn from previous successes and mistakes.

12 Two excellent examples are the recent ex-post policy evaluations for environmental licensing and

transportation from the Hellenic Federation of Enterprises.

16

(ii) Inefficient implementation of regulation, in the form of Competition Law and

Sectoral Regulation of network industries

One of the key pillars for a competitive environment and one where the government has a

clear role to play, is an effective legislative and institutional framework for dealing with cases

where regulation is necessary for efficient market outcomes. Of the two cases we have in

mind here, the first concerns Competition Policy and the other is related to the regulation of

network markets with Natural Monopoly features (especially Telecommunications and

Energy). In this section we concentrate mainly on Competition Policy while the regulation of

the telecoms and energy sectors is discussed in more detail in section 5.

First, it should be noticed that the legal framework for the protection of free competition in

Greece has been largely modernized through a series of amendments13

of Competition Law,

following the standards of the European legislation. However, the quality of enforcement is

very low.

Quality should be assessed on the basis of the effectiveness of the policy to deter anti-

competitive practices by firms and organizations in the private and public sector, to identify a

large part of such practices that are not deterred, and to minimize decision errors in cases

where potentially anti-competitive practices are identified and are investigated. As stressed

by Buccirossi et.al (2011), various features of the legal and the institutional framework affect

the effectiveness of enforcement. Greece is behind in all of these features. In particular:

• Independence of the Hellenic Competition Commission (henceforth, HCC) and the

sectoral regulatory authorities from political interference, especially as regards to

investigations and decisions directly affecting specific markets and firms.

Traditionally, the “political culture” in Greece, and this is true across the spectrum of

political parties, favors intervention in the work of the “independent” authorities. In

order to improve conditions towards real independence, the president and the

members of the authorities should be selected in all cases from multi-party

committees of the parliament in which the government (or the ruling party or parties)

is involved but doesn’t hold the majority.

• Absence of a specialized appeals court to examine the decisions of the authorities in

the cases of appeals – modeled on the standards of the Competition Appeals Tribunal

13 The first major amendment took place in 1995 and this was followed by amendments in 2000, 2005 and 2011.

17

of England, which many other European countries have followed and in which there

must be participation, as in England, France and other countries, of economists. This

is of great importance so as to be really able to (re)examine cases on matters of

substance and not simply investigate the propriety of the legal procedures followed.

• Low quality decisions as a result of the use of approaches, especially in recent years,

for the evaluation of potential anti-competitive practices, that do not rely on the

examination of the effects or the impact of the specific practices on social welfare14

(especially on consumer welfare – economics or effects-based legal standards) but

follow a standard formalistic assessment of the facts on the basis of (per se15

) legal

rules.16

This approach17

not only leads to increased decision errors but also has

negative effects on welfare by deterring firms from undertaking practices which

improve welfare, focusing on the effects of the examined practices on the

“competitors” rather than on “competition and consumer welfare”.

• Insufficient resources, in terms of quality and quantity, and outdated composition of

scientific personnel. In relation to the latter, it is worth-mentioning that the HCC is

quite unique in the EU in that it has not yet filled the position of Chief Economist,

who should co-decide on cases examined by the Commission,18

and also in that in the

14 Using modern economic analysis of competition in oligopolistic markets. To give an example in a recent case

concerning abuse of dominance by a major multinational producer in the food industry (Pepsico / Tasty) the

firm was condemned for abusive behavior essentially on the basis of the HCC finding (strongly disputed by the

defendant) of a high market share and of intent and without any attempt to produce a theory of harm for the case

linking alleged behavior to detrimental effects on competition and consumer welfare. Indeed over the period of

the alleged practices the market share of the firm (irrespective of market definition) was not strengthened or was

declining and its prices were falling in the presence of increasing costs of raw materials. 15

Object-based. 16

Effects-based (or economics-based) assessment procedures are used for many years in the U.S., Canada,

Australia, England, Ireland (the term also used is rule-of-reason) and more recently they have been adopted and

are used by the European Commission and many EU countries. It is generally considered that such procedures

lead to fewer type-I and type-II decision errors by the authorities and they also have beneficial deterrent effects

(see also Katsoulacos and Ulph, 2009). The importance of relying on the predictions of sound economic analysis

has often been stressed by OECD. For example, in its recent report evaluating the Russian competition authority

that has in the last few years become the largest authority in the world, the OECD makes as its top

recommendation that the authority must “improve the quality of economic analysis and its application to

competition enforcement throughout the competition authority and in support of improved judicial decisions”

(OECD, 2013) 17

It is worth noting that this kind of legal formalism is typical of the approach followed more generally by the

public administration in Greece and, as stated in a recent report by the OECD (2011), it is one of its most

negative features and in many cases it is responsible for the enormous corruption problem. 18

It is one of the most important positions in the DG Comp as in most European Authorities and today it exists

as an institution in many authorities even at the less developed countries. The omnipotence of legal experts that

characterizes the implementation of Competition Policy in Greece is also evident by the fact that there has never

been a President of the Commission who is an economist (unlike many other European countries). The result of

these phenomena is that important issues, which are basically economic, are examined and evaluated by legal

18

last ten years none of the few Commission members (who are not legal experts) is

specialized in the economics of competition.19

The scarcity of expert/specialist

resources in quality and quantity is also characteristic of the sectoral regulatory

authorities of the telecom and (to a lesser extent) energy sectors (EETT and RAE).

• Inefficiency in terms of identifying infringements and long delays in investigating

cases and reaching decisions. Commentators on economic policy issues frequently

refer to the Commission's inability to effectively address cases concerning likely

collusion (i.e. cartels)20

. And there are cases where firms wait for a complaint against

them to be investigated for more than 10 years. The consequences of the above are

evidenced by Greece’s performance in the relevant index of the World Economic

Forum. As noted in Section 2 above, Greece position in WEF’s index of the

effectiveness of anti-monopoly policy has slipped from the 36th place in 2006 to the

83rd

place in 201121

.

• As in many other areas of the public administration there are still overlapping

competences between the independent administrative authorities. The most important

one concerns the case of EETT which has powers for competition issues for the

telecommunications industry but there is no effective coordination with the HCC.

• Finally, the extremely important competitive neutrality principle is not used. The

Competition Commission has, to a large extent, not been treating organizations in the

wider public sector in the same way as firms in the private sector, by prohibiting

practices or proposing their amendment when they distort competition. This may

happen when public organizations act as suppliers or buyers in markets, or in public

procurement, for providing local government services, for providing information

services etc. On the other hand, it should be stressed that the Commission has

experts and the final decisions are based on legal experts’ opinions alone even when the recommendation of

economists point to different directions and conclusions. It should be noted that the position of a Chief

Economist in the HCC is allowed under the new (2011) competition law, but the position remains empty until

today. Finally, it should be stressed that these comments do not imply that we underrate the importance of the

group of economists in the Commission. What we argue is that there should have been more economists trained

at the highest (PhD) level, there should be more investment in human capital development through opportunities

for continuous training and that economists should be allowed greater influence in decision making. 19

Not including alternate members. 20

In one such case concerning an important industrial sector, a decision is being under consideration for about

six years. 21

Indeed, it ranked 92nd

, in the latest 2013-14 report – as shown also in Figure 3 in Section 2. Nevertheless it

should be noted that there are signs of an improvement in enforcement procedures in the last 2-3 of years with

efforts to reduce delays and handle an increasing number of cases.

19

performed significantly better in recent years in terms of advocacy and outreach

activities and we return to this important dimension of its activities in the section that

follows.

4. Towards a National Competition and Competitiveness Policy: Key

Requirements

We believe that in order to deal with the problems from the mis-regulation of product

markets identified in the previous two sections, Greece should design and implement a

National Competition and Competitiveness Policy (henceforth, NCCP) plan.

The NCCP includes competition policy in the more narrow sense – that is competition law,

which condemns and deters business conduct or practices that weaken the real and/or the

potential competition – namely, various practices by dominant firms, cartels and some

horizontal and vertical mergers between firms. But the enactment of competition law is

certainly not enough in order to create conditions of effective market competition. Conditions

of effective market competition require a NCCP which should include and rely on the

following three components.

First, a modern and effective legislative and institutional framework for dealing with cases

where regulation is necessary in order to obtain satisfactory market outcomes. The NCCP

should focus both on competition policy and on regulation of network markets with natural

monopoly features (especially telecommunications and energy). As we discussed in the

previous section, the main issue here is not the legal framework itself, but the efficient (more

timely interventions, quicker and more open decision processes) and effective

implementation (effects-based approach; protection of competition, not competitors) of

regulation to the benefit of consumers.

Second, the NCCP should include an efficient policy for the adoption and control of

regulations. That is, to promote actions, policies and institutions so as to reduce the cost of

unnecessary and excessive regulation (that often also becomes the source of corruption) and

by repealing legislation to create conditions of easier market entry and exit. We return to this

in more detail below and propose a concrete action plan.

20

Third, the NCCP must also cater for the development and enhancement of

competition advocacy, that is the study and promotion of the benefits of competition for

growth and social welfare, so that the competitive spirit and culture will permeate deeply the

Greek economy and society.

The absence of competition advocacy in our country has made the implementation of

other measures of NCCP especially difficult. An optimistic sign in this respect is that the

HCC has been very active in recent years in advocacy. The HCC’s advocacy and outreach

activities in the last three years according to Loukas (2014) “has revolved around four key

themes those of (a) liberalization of professional services (b) legislative distortions mostly

affecting retail and food supply chains (c) Greece’s Competition Assessment Project22

and (d)

the publication of competition compliance and awareness guides, primarily addressed to trade

associations, as well as procurement/contract awarding public authorities”. The structural

reforms, advocated by HCC in the context of these activities are, as we have stressed above,

and as Loukas (2014) also notes essential for Greece becoming competitive in international

markets and entering a sustainable growth path.

Policy for the Adoption and Control of Regulations

For designing and implementing a new comprehensive policy for the adoption and control of

regulations a strategic framework for improving the production of regulations and for

reducing the regulatory burden should be firstly defined and adopted. The framework should

set as a key strategic objective the elimination of all the avoidable cost of regulations and

bureaucracy by measures which:

- Remove existing regulations which, without being necessary, hamper growth

- Allow new regulations to be adopted only as a last resort

- Reduce the number of new regulations

- Improve the design and ex-post assessment quality of new regulations

- Reduce the cost for firms and citizens

- Improve the way in which regulations are implemented and monitored

22 An OECD-managed project, in partnership with the HCC, which aimed at identifying rules and regulations

that may hinder competition and prevent the proper functioning of markets (see, OECD 2014).

21

Then, an organizational and decision-making structure should be established which has the

following key features23

:

The Executive Committee for Better Regulation (henceforth, ECBR) should be established as

a governmental committee that assists regulation-makers (in Ministries etc.) with new ideas

and tools on approaches that are alternatives to the adoption of new regulations - such as self-

regulatory solutions, solutions with less regulation (in which a great part of the

implementation burdens the firms), providing information and training services, tools of

financial incentives etc. The ECBR is assisted by the Strategic Group on Better Regulation

chaired by the non-executive chairman of the ECBR in which representatives of non-

governmental organizations or social partners (such as the Hellenic Federation of

Enterprises), of the workforce, consumers, and the government, participate24

.

When a Ministry wants to propose a new regulation, after having taken into account the

views and ideas of the ECBR, it should be obliged to undertake on its own or to commission

independent consultants to conduct a Regulatory Impact Assessment Study of the proposed

regulation and then to send the proposal along with the study to the ECBR and the Reducing

Regulation Committee, a Sub - Committee of the Cabinet. One of the main responsibilities of

ECBR should be to examine the proposal and the study, to ensure that the proposal is based

on high quality analysis and evidence and to advise the Reducing Regulation Committee on

whether the proposal should be implemented or amended or to be abandoned by the

competent Ministry. The evaluation of the proposal and the study of the ECBR should be

based on detailed instructions and recommendations issued in the first place by the ECBR.

The final decision concerning the adoption of the regulation will be taken by the Reducing

Regulation Committee. In England, for example, the ECBR - i.e. the Regulatory Policy

Committee - is from 2012 an independent non-executive public body funded by the Ministry

for Business Innovation and Skills.

23 Our proposal combines features of the existing British and the Australian institutional structures that are

empowered with the responsibility of controlling and potentially abolishing existing regulations and of

monitoring the adoption of new regulations to make sure that they are necessary and proportional to the need

that they are supposed to address. 24

The structure proposed in this paragraph and that immediately after, follows very closely the British model

that went through extensive review and reforms as late as 2012.

22

We further suggest that the Greek ECBR will have powers which combine those of the

Regulatory Policy Committee in England with at least some powers of the Australian

Productivity Committee (and the eventual parallel abolishment of the existing Greek

Competitiveness Council). Specifically we propose that the Greek ECBR will also have the

following major responsibilities:

- Reduction of the existing regulatory burden by abolishing or modifying several

existing regulations based on specific objectives. Here, in order to have relatively

high chances of succeeding, it is necessary that the government will legislatively

commit to a detailed road map for the implementation of reforms in the regulatory

framework with clear deadlines, systematic monitoring and ex-post assessment of

the implementation progress, and with a strong communications strategy.

- Monitoring of the performance of the government departments through an Annual

Report which provides information on the effectiveness of implementing the

program of improving the regulatory environment and of other essential

government services such as those of justice, education and health.

- The ECBR should also act as a Complaint Office for non-observance of the

competitive neutrality principle - which we mentioned in Section 2 above. In this

way a mechanism is institutionalized for receiving and evaluating complaints and

providing independent advice to the Reducing Regulation Commission and, as a

result, to the Cabinet in cases where the independent administrative authorities or

other government departments act in a way which is incompatible with the

competitive neutrality principle.

Together with the ECBR, the following two rules should also be adopted: the one-in, one-out

rule and sunset clauses. The purpose of the One-in, One-out (OIOO) rule is that no new

primary or secondary legislation which involves cost for firms or organizations be enacted,

unless its necessity is fully justified, without the removal of an existing regulation with

equivalent value. The regulations required for the implementation of EU obligations would

be outside the scope of the OIOO rule, except for gold-plating regulatory obligations from the

EU that would require the removal of an equivalent regulation. The introduction of the OIOO

rule means that policy makers should take into account the net cost for firms and

organizations of every new regulation and will have to seek a corresponding regulatory

measure which can be removed early in the policy-making process.

23

Sunset clauses (provisions) are a legal tool which provides that a law or a regulation expires

after a certain period of time. At the end of its predetermined life time a regulation is either

abolished or updated. The sunset clauses will force the government to continually assess and

justify the burden of a regulation, providing opportunities for improvements in the legislation.

In cases where a Ministry does not wish to end a regulation, it has to renew or modernize it.

Sunset clauses are used to ensure that the regulations which are no longer needed are deleted

and that the regulations still needed are updated and improved where necessary. They also

help in creating deregulation measures which are needed in the context of the One-in, One-

out rule.

5. The Regulation of Network Industries: two instructive case studies - Telecoms

vs. Energy

This section provides a description and comparison of recent developments, including

regulatory developments and of the current status, in telecommunications and energy. In

addition to the importance of these two industries/sectors for supporting the development of

key sectors of the Greek economy (eg tourism, competitiveness of energy intensive sectors)

and the efficiency of the delivery of public sector services, we have chosen these industries as

they provide an interesting contrast of two regulatory paradigms: the largely successful

implementation in Greece of a more prescriptive EU wide liberalization/regulatory model in

telecommunications, with the application of a much more discretionary, and as a result

uncertain, deregulatory model in the energy sector.

5.1 Telecoms – holding back economic growth?

The rapid evolution of technologies has shaken up the telecommunications sector during the

last two decades. Telecommunications services were traditionally delivered to households

and businesses through fixed (wireline) technologies, by vertically integrated, often

government owned, and largely monopoly operators. This was necessary as the important

objective of achieve nationwide delivery of communications services required substantial

investments to roll out national wireline infrastructures. These involved significant fixed

costs, giving the industry natural monopoly characteristics. The arrival of mobile (wireless)

technologies in the late 1980s, and their evolution, has transformed the sector with most

consumers using both fixed and mobile technologies to access and consume communications

services – including both traditional voice services, and internet services. Unlike

24

fixed/wireline markets, mobile markets have evolved into competitive markets, with typically

3-4 mobile operators, reflecting the rapid growth in demand for mobile communications

services combined with relatively lower costs of rolling out national infrastructures.

The central regulatory tasks have been to (a) enable the development of sustainable

competition in national fixed telecommunications markets, which in Europe was done

through a model of encouraging entry based on providing access to the non-contestable parts

of the supply chain (ie the access network of the vertically integrated incumbents), and (b)

facilitate the national/local adoption of both fixed and mobile technological innovation and

related services. In light of the rapid and ongoing growth in the internet economy, and the

associated economic and productivity improvements, a key policy objective for the

telecommunications sector in all countries is how to facilitate and encourage the development

of higher speed/higher capacity (broadband) internet access.

In the case of Greece, there was some delay, with liberalization of Greece’s fixed

telecommunications market starting after other EU countries. In terms of technology, Greece

has also been slow in adopting the latest technologies: high-speed fixed broadband25

services

were only launched in November 2012 after a long period of regulatory review; and Greece

was the last EU country to clear the spectrum band necessary for use for high-speed mobile

broadband services, and one of the last countries in the EU to award the spectrum in 2014.

Despite the delays, liberalization has been associated with improved outcomes for consumers.

New firms have entered the fixed line market, and competitive markets for the provision of

mobile services developed during the 1990s and early 2000s. Whilst technological evolution

including the technological fusion between IT and Telecoms has been a key driver of

improved efficiency in the telecommunications sector26

, competition between mobile network

operators has played an important role in passing such gains to consumers27

. Mobile sector

25 Called VDSL (Very-high-bit-rate Digital Subscriber Line).

26 In a recent study for the GSMA, “Assessing the case for Single Wholesale Networks in Mobile

Communications”, September 2014, recent technological advances through mobile spectrum efficiency were

estimated to amount to a c. 25% annual increase in the capacity available. 27

In a recent study for the GSMA, ‘Assessing the case for Single Wholesale Networks in Mobile

Communications’, September 2014, it was estimated that competition between mobile networks resulted in 3G

take-up being 17% higher than in countries where mobile services were offered monopolistically.

25

prices in Greece have declined by 31% between 1999 and 2010 compared to a 43% increase

in consumer price inflation.28

Despite the fact that telecommunications sector, overall, is active with competition in the

provision of both fixed and mobile services, the development of broadband infrastructures

and services in Greece lags other countries. Broadband take-up in Greece has been slow, and

ultra high-speed broadband take-up very low. The relatively low take up of basic broadband

services in particular has implications for the productive capacity of the Greek economy, as

broadband is considered to be a potentially important enabler of wider economic growth and

facilitator for the achievement of efficiency and productivity improvements.29

This section

therefore focusses on the development of broadband in Greece. We start by considering the

current state of the broadband sector, followed by the consideration of a short term policy

proposal to encourage the take-up of (basic) broadband. We then consider longer term policy

options.

5.1.1 The Greek broadband sector

Greece’s (basic) broadband penetration rate has also persistently lagged the penetration rate

in the EU30

: within Western Europe, Greece held in 2013 the lowest level of broadband take-

up, with a household penetration rate of 55%, against an EU average of 76% in 2013.31

The

situation is similar in terms of mobile broadband take-up32

: Greece’s penetration was the 2nd

lowest in the EU at 38% compared to more than 60% EU average.

Greece’s relative performance in relation to the EU could reflect its lower income. Based on

econometric analysis that controlled for relative income levels (in terms of GDP/capita), as

well as other factors that could affect the take-up of broadband33

(population density,

urbanisation and educational levels), Greece also lags in the penetration and broadband

speeds compared to what would be expected given its level of income, etc. Figure 7 below

28 Source: AUEB, Department of Management Science and Technology and ICAP report.

29 OECD 2011, and references therein ITU, 2012.

30 A review of the factors that are hindering wider use of broadband among individuals, firms and government

can be found in a recent IOBE study (C.Troulos, E.Demian, A.Tsakanikas, ‘Making the Internet Thrive in

Greece’, IOBE, December 2012). 31

European Commission Digital Agenda Scoreboard 2014, Key indicators. 32

European Commission Digital Agenda Scoreboard 2014, Key indicators 33

Frontier Economics, 2015

26

sets out the actual and expected take up of fixed broadband in Greece - the gap between

actual and expected levels has averaged c. 15 percentage points since 2009.

Figure 7: Fixed (basic) broadband penetration, actual and expected

Source: European Commission and Frontier Economics analysis

In terms of prices of fixed broadband services, the evidence suggests that prices in Greece are

at the EU average for broadband services of 12-30 Mbps, but are above the EU average for

superfast broadband services (30-100 Mbps).34

5.1.2 Greece’s broadband performance could affect its economic performance

The relatively low take up of broadband services in Greece may affect the country’s growth.

There has been a significant amount of research on the relationship between broadband

diffusion and economic growth. The consensus view is that the evidence is consistent with

broadband take-up having a positive impact on economic growth through35

:

1. Better speed, accessibility and quality of information flows,

2. Enhancing business efficiency and management,

3. Increasing market transparency and reducing barriers to entry, and

4. Allowing a faster diffusion of innovation.

34 European Commission, Scoreboard 2014 - Trends in European broadband markets 2014, slide 26.

35 See Czernich et. al. (2011); Koutroumpis, P., (2009); Qiang, C., and Rossotto, C (2009).

0%

10%

20%

30%

40%

50%

60%

70%

80%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Actual take-up in Greece Expected take-up in Greece

27

A more recent study summarising the research on the relationship between broadband and

economic growth36

has also noted that there was evidence of a so called ‘critical mass’ effect:

the impact of broadband take-up on GDP growth exhibiting, at least over a range, increasing

returns. The same study found that broadband has a higher productivity impact on sectors

with relatively higher transaction costs (such as financial services), or high labour intensity,

such as tourism. In terms of empirical evidence, three studies have sought to estimate the

magnitude of the effect that broadband penetration has on economic output. Thus, Czernich

et al. (2011) estimated that a 10% increase in broadband penetration led to an increase of 0.9-

1.5 percentage points to the per capita GDP growth rates. Qiang and Rossotto (2009) estimate

that a 10% increase in broadband penetration adds 1.21 percentage points of GDP growth in

high-income countries, and 1.38 percentage points in middle to low income countries.

Koutroumpis (2009) finds that a 10% increase in broadband penetration is associated with a

0.25 percentage increase in GDP growth37

. The available evidence indicates therefore that a

growth in broadband penetration could play a significant role in contributing to economic

growth.

5.1.3 Short-term policy considerations: stimulating broadband take-up in Greece

through a tax policy

Governments have considered a range of policies to stimulate and/or promote the growth of

broadband take-up,38

with the focus recently in developed economies on the promotion of

higher speed broadband take-up. As indicated earlier however, Greece lags significantly

behind in terms of basic broadband take-up. Given the link between economic growth and

broadband take up, this could be significantly constraining Greece’s economic growth.

The priority for policy makers should be to consider options to stimulate the take-up of basic

broadband services to levels at least as high as the EU average. As broadband has the

36 See ITU (2012).

37 These estimates are from the average level of broadband penetration in the sample of the countries included in

the analysis. As the studies cover a number of years when broadband penetration was growing, the average

would be expected to be lower than the level of broadband penetration in Greece. 38

Section 7 of the ITU study provides a good description. Greece has also adopted recently a policy under the

EU funded programme of digital Αλληλεγγύη – however eligibility was limited (up to 290,000 households), and

was of limited duration (one year).

28

characteristics of an experience good, a short term policy to stimulate broadband take up

could also have longer term implications on the level of broadband penetration.39

The main instrument to stimulate demand growth in the short-term is price.40

We therefore

assess a taxation policy in relation to the prices of broadband services, by considering in this

section the impact and cost of a reduction in VAT on broadband services from the standard

rate of 23% to 13%. We model a number of effects of a VAT reduction to estimate the net

cost of the policy:

• take up of broadband will increase41

;

• VAT revenues will decline42

;

• the increase in broadband could have wider impacts on the productive capacity of

broadband services43

; which increases output and hence taxation revenues.

Table 1 below sets out the impact44

of these factors over a three year period. The scenario in

which the policy is directed only at new subscribers is, as expected, more efficient, with a

higher increase in tax take.

39 As consumers and SMEs experience the benefits of broadband (and upgrade their computing and other

technologies to accommodate services which require higher bandwidth), then they may have a higher demand

for broadband after initially experiencing it. Moreover they may be more likely to switch to higher speed

broadband services once they have experienced the benefits they can get from the use of basic broadband

services. 40

Both price and non-price factors, such as computer literacy, availability of information/services, availability

of content are expected to affect the demand for broadband (see ITU, 2012, section 7.5) and C.Troulos,

E.Demian, A.Tsakanikas, ‘Making the Internet Thrive in Greece’, IOBE, December 2012. Policies to stimulate

demand through the development of a number of non-price factors are by their nature longer term in terms of

their impact. 41

We have based our estimates of own price elasticity of demand on the mid-point of two relatively recent

estimates. We have assumed an elasticity of -0.71 which is the mid-point of -0.44 (as found in Rosston et al.,

2010), and 0.97 (as found in Cardona et al., 2009). 42

We consider first order VAT effects such as lower VAT revenues from “existing” broadband subscribers (or

subscribers who would have taken up broadband at the pre-existing VAT rates) and increased broadband VAT

revenues from “new” broadband subscribers partially offset by lower VAT from “new” broadband subscribers

switching from higher VAT products. We also consider second order VAT effects such as higher VAT from

existing consumers who receive an income “windfall” as a result of the VAT reduction. Assuming that a

proportion of this increase is spent rather than saved, then VAT revenues will also increase accordingly. 43

Our analysis uses estimates derived from Czernich et al. (2011) that relate broadband penetration to economic

growth in order to calculate the increase in GDP that can be attributed to the policy. Czernich et al. (2011)

reports a low and a high estimate, of which a midpoint is taken for the reported central cases. Czernich et al.

(2011) finds that the GDP effect of broadband penetration is immediate, so lags are not incorporated into the

model. 44

The full results and assumptions can be found in Frontier Economics (2013).

29

Table 1: NPV tax cost of a three year VAT cut (€ M)

VAT cut applies

to all subscribers

VAT cut applies to

new subscribers

Direct effect on VAT -222.6 -47.5

Increase on general taxation as a

result of increased economic output 560.26 560.26

Net effect on taxes 337.66 512.76

Model assumes VAT is cut from 23% to 13% and the VAT cut is 100% passed through to retail prices. NPV based on

a social time preference discount rate of 3.5% (used by the UK Government (HM Treasury Green Book)). We assume

that churn rate is 9%, but that a VAT cut targeted at “new subscribers” doubles churn to 18%.

The above analysis shows that a VAT cut on broadband services can be tax generative as it

stimulates growth. As broadband has characteristics of an experience good, consumer

demand may well be more price inelastic after the good has initially been consumed.

Therefore, even if VAT was to be raised after a period of time, the demand reduction

following the resulting price increase may be less than the demand increase which would

result from the initial fall in prices. A key issue is the ability to design a scheme that will be

targeted at current non-subscribers: even if the impact on growth was 1/10th

of the estimated

effect, it would still be desirable to introduce the VAT reduction if it could be well targeted.

5.1.4 Longer-term policy considerations: stimulating basic broadband demand with

non-price interventions

Over the medium term policies should focus on (i) closing the gap in demand for broadband

between Greece and the rest of the EU; (ii) providing a strong but predictable regulatory

framework which supports competition and enables investments in broadband infrastructure

and (iii) considering measures to incentivize investment in ultra-fast broadband

infrastructures (i.e. fiber to the home or building– FTTH/FTTB).

In relation to (i), surveys of non-users of internet services have indicated that there are three

types of barriers to Internet adoption and use. In order of relevance: (a) non-users do not see

the relevance of the Internet to their lives (“not needed”)45

(b) non-users do not have the skills

to use the Internet (“lack of skills”), and (c) non-users cannot afford the equipment and/or

45 According to an Ofcom survey (Ofcom (2009)), among respondents who gave Not needed as the main barrier

to Internet use, “knowledge of the Internet was low, with 95% confessing little or no knowledge of it”.

30

telecommunications connection charges required to use the Internet46

. Therefore policy

measures could identify low user groups (such as elderly and low socio-economic groups)

and focus on measures which increase e-skills and awareness for these groups. Although

there is limited hard evidence about the quantitative impact of such measures47

, in Greece and

elsewhere48

, policies which encourage the supply of Greek-language content, internet-based

applications and services could themselves increase demand for the internet; policies which

enable access to and use of the mobile Internet could also give non-users a good way to build

skills and confidence49

.

In relation to (ii), mobile networks are expected to play a key role in delivering superfast

broadband infrastructure.50

In the absence of a second fixed infrastructure, facilitating

competition between fixed and mobile broadband networks should support the objective of

faster and wider availability of superfast broadband services. The Government should

consider clearing the new sub-1GHz spectrum (700 Mhz) band for mobile internet.

Competition in fixed superfast broadband should also be supported.51

In relation to (iii), whilst the business case for FTTH/B investment may be currently

uncertain in Greece, there is a strong view that such investments will be necessary in the

longer term to support both the competitiveness of the economy and the delivery of public

and other services.52

The absence of a competing cable/fixed infrastructure in Greece and the

significant (sunk) costs involved in developing a fixed cable infrastructure implies that it is

unlikely that infrastructure competition would stimulate the transition to ultrafast broadband.

The fixed incumbent may also have an incentive to seek to maximize the value of its existing

investment in superfast broadband infrastructure (VDSL). This therefore may require policy

46 In studies examining the relative significance of the different factors price ranks below relevance/skills (see

for example a summary in Troulos et al, IOBE, 2012, idem). The design of non-price policies aiming to

stimulate demand (and increase supply) is therefore very important to accompany any demand stimulation

measure based on price. 47

See Hauge and Prieger, (2009). 48

Partly because the design of such schemes commonly does not include explicitly quantified targets. 49

In the survey undertaken by Ofcom (2009), when considering measures to facilitate internet use and adoption.

72% of those who said they intended to get the Internet at home over the next six months were already Internet

users outside the home. People in contact with regular Internet users (eg at work, in schools, or family) are more

likely to take up the Internet than others. The study by Troulos et al (IOBE, 2012, idem) provides a good

summary of other measures based on a survey of Greek businesses and consumers. 50

Through the deployment of 4G (4th Generation) technology, that can deliver download speeds of up to 100

Mbps 51

Local loop unbundling has been a success in Greece and the Government should ensure that OTE’s

downstream rivals are provided access to its VDSL network at prices that sustain the level of existing copper

based competition, whilst maintaining OTE’s incentives to roll-out its VDSL network. 52

The EU digital agenda target for 2020 is for 50% of the EU to subscribe to broadband with speed above 100

Mbps.

31

intervention to consider investment targets as part of the regulatory framework, and/or assess

alternative options to deliver such investment, including the possibility of public funding and

‘co-investment’ (where all operators in the Greek telecommunications market could

participate in some of the required investment).

5.2 Energy – a muddle53 in need of very substantial reforms

54

Introduction – Objectives of the 3rd European Energy Package

The weaknesses, lack of development relative to other European countries and problematic

future prospects of the Greek energy sector can only be understood and assessed if set against

the rapidly changing global and European environment. This has been witnessing in recent

years a revolution characterized by the introduction of new fuels - shale gas, the rapid growth

in Renewable Energy Sources (RES), large scale changes on the global energy balance and,

in addition and most importantly in Europe, the implementation of the ambitious 3rd

Energy

Package55

.

The latter’s main objectives are56

to:

• Strengthen in a substantial way the overall framework for a competitive internal

European energy market, develop a common market design for all member states, the

“Target Model”, in order to achieve and promote market coupling – broadly, cross-

border capacity trading.

• Facilitate cross border trade in energy, regional cooperation and investment and

achieve a higher utilization factor of the infrastructures such as the electrical

interconnections.

53 The word, defined as “a confused, troubling and embarrassing condition”, describes perfectly the present

situation in the Greek energy market. It should be stressed that this situation exists even though the Greek

Regulatory Authority for Energy (RAE) has in recent years been at the forefront of proposals for many of the

necessary reforms that will be discussed below. It is the outcome mainly of too many decision-centers with

conflicting objectives influencing policy developments – see below. 54

We would like to thank Miltos Aslanoglou and George Stamoulis for very useful comments on an earlier

version of this section and Anastasios Mastrapas and Ioannis Psarros, recent postgraduates of the Economics

Department for comments and excellent research assistance in preparing this section. 55

The European Union's Third Energy Package is a legislative package for an internal gas and electricity market

that aims to further open up the gas and electricity markets in the European Union. The package was proposed

by the European Commission in September 2007, and adopted by the European Parliament and the Council of

the European Union in July 2009. It entered into force on 3 September 2009. 56

For a summary see, Aslanoglou (Vice-chairman, Greek Regulatory Authority for Energy (RAE)) “Electricity

Market Reform in Greece: no Time to Waste” (page 3), CRESSE (2013) Conference Special Policy Lecture on

Energy Markets. According to the Target Model’s provisions four levels of transactions are foreseen,

specifically in the: (i) Day Ahead market: Coupling of markets, uniform pricing, (ii) Intraday Markets: regional

markets, (iii) Balancing Markets: operated by the TSOs, and (iv) Forward markets: based on the cross border

trading activity.

32

• Separate effectively production and supply (which could be competitive) from

transmission networks, which have natural monopoly characteristics (unbundling).

• Ensure the effectiveness and independence of National Regulatory Authorities

(NRAs) and achieve greater market transparency on network operation and supply.

• Increase solidarity among the EU Member States and promote consumer rights and

their protection, in particular for vulnerable customer groups.

• Organize the cooperation at the EU level of NRAs (the ACER), and of electricity and

gas Transmission System Operators (TSOs)57

.

An important aim of the Target Model is to enhance cooperation between the TSOs and to

develop common market rules for all member states. This is expected to facilitate the

efficient use of installed or future infrastructure of electricity and natural gas systems across

Europe and create the necessary market size to allow the development of supplementary

markets (reserves, ancillary services). Furthermore, it aims to provide unbundled energy,

capacity or reserve products and, by reducing uncertainty, to promote investment decisions

and attract private equity, thus leading to enhanced security of supply and stronger

competition under stricter environmental restrictions.

The implementation of the Target Model in Greece requires substantial structural and other

reforms of the current market organization. Below, we first set out the main features of the

current situation in the Greek energy market and we then discuss a number of proposed

reforms that will allow the country to implement the Model.

Recent developments and the current situation in Greece

The main features characterizing the Greek electricity and natural gas markets in recent years

are the following:

• The “liberalized” parts of energy markets58

have been and are still dominated in

terms of market share by public monopolies (in production and in supply) –

57 TSOs are entities entrusted with transporting energy in the form of electrical power (or natural gas) from

generation plants (or after receiving it from producers) over the electrical grid (or via pipeline) to local

distribution operators. 58

The parts of production and supply (wholesale and retail), excluding, that is, the natural monopoly parts of

transmission and distribution.

33

specifically, the Public Power Corporation (PPC59

) dominates60

both production

and supply in the electricity market (as can be seen in the Diagrams below) and

the Public Gas Corporation (DEPA) dominates supply in natural gas.

Figure 8: PPC market share61

in retail supply and production

Source: LAGIE (Centralised pool administrator)

• Further, electricity production suffers from serious cost asymmetries. PPC is the

only firm using low cost fuels for generation62

– specifically, lignite and water

59 At present the State is still PPC’s majority shareholder. During the last few months there have been

government announcements of privatizing PPC and the creation of a so-called “small PPC” in which the State

will not be the majority shareholder. 60

With shares by PPC exceeding on average 70% in production and close to 100% (97% in 2014) in retail

supply – see Diagrams in text. The wholesale and retail markets are examined in more detail below. DEPA

essentially controls 100% of the supply of natural gas. 61

Interconnected system

34

while its competitors rely on natural gas – something that, despite of the existence

of the wholesale market in the form of a Mandatory Pool, give it a difficult to beat

advantage at the retail level. The current highly concentrated market structure and

cost asymmetries in electricity generation and, therefore, lack of effective

competition, as well as the contractual obligations for importing natural gas from

Russia (through a monopolist wholesaler), that were assumed over 10 years ago63

,

are factors that are inhibiting effective market liberalization and development and

cross-country market integration.

• Market liberalization and efficient regulatory enforcement has also been impeded

up to the present by the existence of too many decision centres. This has been

particularly due to the Greek State, in its capacity as the majority shareholder of

both PPC and DEPA64

, often “replacing” in practice the National Regulatory

Authority (RAE), for example, in formulating the price structure to be applied to

the different consumer groups (low, medium and high load customers).

• Price regulation, that still continues65

, has had disastrous consequences for the

productive efficiency of PPC as retail prices have been set so as to cover the

company’s reported costs (also known as ‘cost-plus regulation). So, there are

absolutely no incentives to reduce costs. Further, the access to a relatively cheap,

but finite, energy source (lignite) has implied that the retail household prices in

Greece are still relatively low66

– reducing the pressure to identify and achieve

cost efficiencies in the monopoly parts of the supply chain (transmission and

distribution).

• The wholesale electricity market has relied on the Mandatory Pool that imposes an

obligation to all producers and importers to make available each day to the

centralized pool administrator (LAGIE), whatever energy they wish to inject to

the system and at what specific prices. This information is used in order to

62 There is no unique estimate of the cost gap between lignite and natural gas generation – PPC’s customers

raise it to about 40 euro/ΜWh (given a cost of about 35 euro/MWh for lignite and about 75 euro/MWh for gas –

though PPC insists that lignite cost is 57 euro/MWh). 63

Which implies that PPC’s competitors rely on a high-price supplier (Gazprom) for their natural gas needs –

indeed it is not just Greece that is paying high prices, DGCOMP is currently turning against Gazprom for abuse

of dominant position with excessive prices to European countries. 64

DEPA is in the process of been privatized too – sold to the Azerian company SOCAR. 65

Formal ex ante retail price regulation by RAE should have been terminated on the 1st of July 2013. However,

the state, as the majority shareholder, retains the right to continue to set prices as before. RAE of course can set

maximum price ceilings and regulate ex post excessive pricing on the basis of Competition Law. 66

Between 2011 and 2013 household electricity prices were below the EU-28 average though gas prices were

among the highest (source: Eurostat Energy Prices)

35

determine the next day’s wholesale price (the System Marginal Price) taking into

account similarly expressed demands for energy. The original objectives of the

Mandatory Pool, to induce entry of new producers in the Greek electricity market,

which led about 10 years ago to the gradual entry of three new independent

producers operating gas stations, are now outweighed by the substantial problems

and distortions associated with its operation (particularly the cost-recovery

mechanism, essentially allowing high-cost producers to be able under all

conditions to operate – by just selling wholesale to the pool - without loss etc)67

.

This is also affected by the substantial subsidies that are available for the

generation of renewable-based energy that were induced by the drive to increase

the share of renewable energy sources68

.

• Retail competition between energy producers or independent suppliers is non-

existent - some entry that took place about five to six years ago was not sustained

beyond 2011, due to a combination of delays in the implementation of an effective

opening up of the production/generation part of the market, regulated retail prices

based on PPC’s cost-plus that can be lower than the wholesale (pool) prices at

which independent suppliers can purchase energy, the economic crisis that has

reduced substantially demand69

and the behaviour of the dominant PPC, which led

to limitations in the incentives of new entrants to compete effectively in the retail

market.70

PPC has now returned again to a market share of 97% in the residential

electricity retail market.

A number of policy priorities need to be set and implemented in order to alleviate the

problems in the Greek energy markets. These contain both structural (privatisation / breaking

up of PPC) and regulatory measures - removal of cost-plus regulation of retail prices and

introduction of a NOME-type regulation for securing access by other producers and suppliers

67 For an extensive summary, see Courcoubetis, et al. (2012).

68 Environmental factors have mandated the development of renewable based energy sources though they are

more expensive. The supply of energy from these sources takes priority in the operation of the mandatory pool

system. 69

Relative to what was expected and the expansion of the system which has been combined with the penetration

of massive Renewable Energy Sources (RES) and has created a situation of overcapacity. Of course many ot the

reforms discussed below would be desirable even in the absence of the significant fall in demand induced by the

crisis. 70

For a detailed analysis, see Courcoubetis et al. (2012).

36

to the low-cost energy sources currently controlled by PPC. They are described in detail

below.

Policy priorities for reform

As already noted above, a top overall policy priority is that of the Greek Energy

Regulator preparing the market rules to meet EU’s Target Model requirements and

implementing the Model. More specifically, the State and the regulator should aim to a

progressive change of the fuel mix aiming to a reduction of cost-asymmetries between

producers, that are a result of PPC’s legacy as a public monopoly and owner of essentially all

relatively cheap energy sources in Greece, develop further the natural gas supply options,

facilitating alternative natural gas supply links and promote investments in energy

efficiency71

.

For the implementation of the Target Model and the development of a more efficient and

competitive energy market in Greece it is necessary to undertake a number of measures and

reforms which we describe in detail below.

1. To start with, it is important to restructure the wholesale electricity market in order to

remove the problems and distortions associated with its operation, as mentioned

above. To do this, in the short-run and perhaps the short-to-medium run, the market

could rely principally, as it has in many other European and non-European countries,

on a non-mandatory bid-based, centralized spot market, with the design of the auction

process being that of uniform -or discriminatory- price auctions, without the

distortions characterizing currently the Greek market72

. In the medium-to-long run we

expect that Greece should converge to the situation of the markets in by far most

European countries73

in which the great majority of transactions are based on Over

The Counter (OTC) bilateral contracts. Reforms should promote bilateral contracts,

ultimately by physical delivery by, for example, making them mandatory for those

71 These are the stated objectives of the Greek energy regulator – see, for example, Aslanoglou, ab.cit., (2013).

As he notes, the current organization of the Greek electricity wholesale market does not allow for the efficient

coupling of neighboring markets, that is, it cannot support the implementation of the target model requirements. 72

Uniform-price auctions have been used extensively in US and Scandinavian countries while the best example

of the application of discriminatory auctions is that of UK in the last 13 years or so. The advantages and

disadvantages of these two alternative auction designs have been discussed extensively in the literature, both in

general and specifically for the context of electricity markets. See, for example, Fabra et al. (2006). Needless to

say, of course, that such restructuring of the wholesale market will not on its own produce the desirable effects if

it is not undertaken in conjunction with the other reforms mentioned below. 73

See, for example, Pototschnig (2012).

37

that participate in the NOME-type regulation described below74

, thus allowing for

opportunities to strengthen retail entry and competition.

2. It is important that measures are taken to enhance competition between existing

producers and with potential new market players. This is also necessary in order to

reduce the risk of large price increases in the short and medium run that could follow

the removal of direct retail price regulation. While structural measures involving the

sale of low-cost lignite power stations from the PPC to the other producers could

provide a solution, enhancing competition between existing players, it has for many

years been impossible to bridge the gap between the proposed offers of PPC’s

majority shareholder (the State) and those of the potential buyers and this is

considered at best a long-term scheme. The privatisation of part of PPC (and creation

of a private “small PPC”) is an alternative structural measure that has been proposed

by some parties but is not currently in the policy agenda.75

3. An alternative important measure for achieving these objectives, that can, at least for

the short and medium run, play an important role complementary to structural

measures, is to provide rights of access to third parties/producers (that currently

operate high-cost gas stations) and independent suppliers at a cost-oriented

(benchmarked) price to the low-cost (lignite and hydro) capacity of PPC. This is a

measure similar to that originally implemented in France in 2011 (NOME-type

regulation), where rights to access the low-cost nuclear power capacity of EDF were

given to its competitors – with EDF controlling through its nuclear power capacity

about 85% of production in France.76

The introduction of a NOME-type regulation in Greece can, if properly designed,

create a much more symmetric market structure in terms of costs and capacities and,

74 This is, indeed, a point also supported in the EU-ECB-IMF proposals for reforms in the Greek energy market,

that has also supported the introduction of a NOME type regulation in Greece. NOME: Nouvelle Organisation

du Marche de l’Electricite (see for details below). 75

The proposal to create a “small (privatized) PPC” by the previous New Democracy – PASOK government

that will own a part of PPC’s lignite capacity, if it would lead to competition between two independent cost-

symmetric producers that operate lignite stations would reduce the risk of significant price increases when the

market is effectively deregulated (something that has not yet happened, as we mentioned above). This could

render unnecessary the introduction of NOME-type regulatory measures discussed below. The change in

government following the national election of 25 January 2015 has removed this proposal from the policy

agenda at least for the foreseeable future. 76

It is important to note that the situation in Greece differs from that of France. While EDF produces essentially

with its nuclear power stations, PPC in Greece has a more balanced capacity portfolio, 55% of which is

accounted for by low-cost lignite stations. For a review of the arguments for and against the NOME regulation

see the report of Courcoubetis, et al. (2012). No decisions have yet been taken concerning the fraction of lignite

capacity to which there will be access through this regulation if/when it is implemented.

38

in a recent extensive study by Courcoubetis et al. (2013) it is found that in a totally

liberalized market that operates either through a centralised uniform-price auction

wholesale market or through bilateral (OTC) contracts, this regulation can have a

number of beneficial results. Equilibrium prices will be much lower compared to

those that would emerge without this regulation, at least in low and medium demand

states, while third party producers will be able to increase their market shares, their

profits (that are significant for new investment) and their retail presence.

4. Consider replacing the current cost-plus regulatory controls on prices for transmission

and distribution with mechanisms that can provide stronger cost minimisation

incentives, such as multi-year price controls.77

5. The Capacity Assurance Mechanism is another field of the market that needs reform.

The current mechanism compensates with no distinction all the available thermal

units without taking into consideration which of them are really needed in the long

run. This creates wrong incentives for potential future investors. There is an ongoing

discussion about reforming the Capacity Assurance Mechanism and it is important,

in the context of this discussion that the Greek TSO (ADMIE) sets long term targets

for the development of the System, provides estimates of the need for installed

capacity that needs to be compensated, defines which are the most flexible units that

are really necessary given the RES penetration and thus sends the right investment or

disinvestment signals.

6. It is worth noting here that the above reforms, especially the introduction of a NOME-

type regulation, are also likely to have a beneficial impact on the severe pressures that

the large industrial firms face in Greece to reduce their energy costs and thus become

more competitive in international markets in the midst of the unprecedented economic

crisis of the last years in Greece. Under NOME such firms may be permitted to

purchase low-cost lignite energy in auctions directly or via a common wholesale

market player.78

77 A consultation issued in December 2013, led to a decision (340/2014) in June 2014 on the principles

governing the regulation of IPTO after privatization – regardless of its ownership. This established high level

principles for the interim period (2015-2017), and provided some signals on direction for Enduring

Arrangements, which will apply from 2018 onwards. A key feature of the proposals is that the current cost-plus

price regulation regime will be replaced by a multi-year revenue cap regime. The enduring arrangements

envisage at this stage the introduction of incentives to improve efficiency by outperforming the targets set, and

incentives to improve Quality of Service performance, under 4 year periods price control cycles. 78

This has indeed be a major issue behind the motivation for introducing a NOME-type regulation in Greece.

39

7. It is also very important to improve the efficiency in the management of RES

production, secure adequate financing and, most importantly, manage its impacts to

the competitive part of the market, as in the last years incentives (through guaranteed

high prices) to invest in RES have been responsible for exerting an upward pressure

on retail prices. There is renewed thinking in Europe on re-visiting the policies for

achieving lower CO2 emissions whilst maintaining competitive energy costs, and

Greece should re-consider its policy in this context – especially in terms of continuing

to provide incentives for further investment in more expensive RES.

8. Finally it is very important to improve the capability of the energy regulator that has

to undertake the very challenging tasks of designing network price controls, retail

price controls (with the regulator deciding the period of phase out, triggers for phasing

out, basis of price control), price control for the capacity release, and any other

regulated tariffs in a way that does not destroy investment incentives and also of

implementing the necessary measures that will secure the growth of more competition

in the market.

6. Concluding Remarks

There is no doubt that to a casual, but objective, reader the deep economic crisis that started

in Greece in 2009 was a long time coming. Virtually every international index of

competitiveness indicated that the economy was suffering along many dimensions: high

barriers to entry, heavy state control, inefficient regulatory framework, corruption and lack of

effective competition. An article in Newsweek79

described Greece as a country that is

“unique in its dysfunctionality” and as “the most wasteful and corrupt Western nation”.

Another80

article notes that Greeks “behave as a collection of atomized particles, each of

which has grown accustomed to pursuing its own interest at the expense of the common

good.”

However, in the midst of the most serious fiscal crisis that Greece has ever gone through, a

very serious effort has started “to change these facts” and this has “started with the abolition

of some of the strict regulations in various sectors of the economy that are for the first time

being freed up to competition”. OECD named Greece as a “champion in terms of reforms”

79 Newsweek, “How Europe’s New Goals Will Pay Off”, 24/12/2010.

80 Vanity Fair, “Beware of Greeks Bearing Bonds”, 1/10/2010.

40

for 2012.81

All international indicators are now showing a reversal of the previous negative

trend for Greece. The effort and the achievements so far are unprecedented and impressive.

Yet, despite the significant progress, there is still significant room for improvement for

Greece to regain its international competitiveness. The effective completion of the structural

changes should clearly aim to reform and privatize public enterprises, liberalize product and

service markets, remove unnecessary and distortive regulations and strengthen independent

sectoral regulatory bodies. These reforms are critical for the short and medium term recovery

and are pivotal for the restructuring of the productive potential of the economy. At the same

time, the long-term strategy must be centered around a coherent National Competition and

Competitiveness Policy plan that will create the conditions for innovative and sustainable

growth. We are moving in the right direction, but we need to do more.

References

Aslanoglou M. (2013), “Electricity Market Reform in Greece: no Time to Waste”,

Presentation at the CRESSE Annual Conference, Special Policy Lecture on Energy Markets,

available in www.cresse.info

Bloom, N., Genakos, C., Sadun R, and Van Reenen, J. (2012), “Management Practices

Across Firms and Countries”, Academy of Management Perspectives, 26(1), 12-33.

Bloom, N., Draca, M. and Van Reenen, J., (2012), “Trade Induced Technical Change: The

Impact of Chinese Imports on Innovation, Diffusion and Productivity”, Review of Economic

Studies, forthcoming.

Blundell, R., Griffiths, R., Van Reenen, J., (1999), “Market Share, Market Value and

Innovation in a Panel of British Manufacturing Firms”, Review of Economic Studies, 66(3),

529-554.

Buccirossi P., L. Ciari, T. Duso, G. Spangolo and C. Vitale (2013) “Competition Policy and

Productivity Growth: an Empirical Assessment”, Review of Economics and Statistics,

forthcoming.

Cardona, Mélisande, Anton Schwarz, B. Burcin Yurtoglu, and Christine Zulehner (2009),

“Demand estimation and market definition for broadband Internet services”, Journal of

Regulatory Economics, 35 (1), 70-95.

Courcoubetis K., Y. Katsoulacos and G. Stamoulis (2012), “Issues of Regulation in relation

to the Greek Wholesale Electricity Market in view of the reforms required in order to

implement the Target Model” (in Greek), report prepared for RAE, July 2012. Short version

published as “Implications for the Greek Electricity Market of third-party access to the low-

cost production of PPC” in Essays in Applied Economics and Finance, edited by Y.

Katsoulacos, AUEB Publications, 2013 (in Greek).

81 Kathimerini, “OECD praises reforms in Greece”, 15/2/2013.

41

Courcoubetis K., Y. Katsoulacos and G. Stamoulis (2013), “The Optimal Design of a

NOME-type Regulation in Greece”, report prepared for RAE (in English), September 2013 –

available from the authors on request.

Czernich N., Falck, O., Kretschmer, T., and Woessman, L, (2011), “Broadband infrastructure

and economic growth”, Economic Journal, 121(552): 505-532

EC Communications Committee, (2013), “Broadband lines in the EU: situation at 1 July

2012”

EC, (2013), “Broadband Coverage in Europe in 2012: Mapping progress towards the

coverage objectives of the digital agenda”.

Fabra N., von der Fehr, and N.H. Harbord (2006), “Designing Electricity Auctions”, Rand

Journal of Economics, 37, 23 - 46.

Federal Communications Commission, (2010), “Connecting America: The National

Broadband Plan”.

Frontier Economics (2012), “Broadband take up performance in the EU: an empirical

analysis”, mimeo, available on request.

Frontier Economics (2013), “Broadband take-up and economic growth in Greece”, mimeo,

available on request.

Genakos, C., P. Koutroumpis and M. Pagliero (2014), “The Impact of Markup Regulation on

Prices”, CEPR Discussion Paper 10243.

Hauge and Prieger, (2009), “Demand-Side Programs to Stimulate Adoption of Broadband:

What Works?”, Working Paper,

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1492342

IOBE (2014a), “Assessing the Macroeconomic Impact of structural Reforms in Greece”,

policy paper, March 2014.

IOBE (2014b), “State of play of liberalization and remaining barriers in professions and

services in engineering, technical and related sectors in Greece”, policy paper, February

2014.

IOBE (2014c), “State of play of liberalization and remaining barriers in professions and

services”, policy paper, February 2014.

ITU (2012), “The Impact of Broadband on the Economy: Research to Date and Policy issues”

Katsoulakos, Y., G. Makri. and V. Bageri (2011), “Regulatory Burden, Competition and

Growth”, report funded by the Bank of Greece - available on request.

Katsoulakos, Y. and G. Makri (2013) “Greece’s Competitiveness and Regulatory Burden:

Towards a National Competition and Competitiveness Policy”, report funded by the Hellenic

Federation of Enterprises (SEV) - available on request.

Katsoulacos Y and D Ulph (2009), “Optimal Legal Standards for Competition Policy”,

Journal of Industrial Economics, 57(3), 410-437.

Koutroumpis, P., (2009), “The economic impact of Broadband on Growth: a Simultaneous

Approach”, Telecommunications Policy, 33, p. 471-485

Loukas D. (2014), “Greece: Diversifying and Expanding Advocacy Efforts and Outreach

Activities in view of the Ongoing Financial Crisis”, CPI Antitrust Chronicle, Aug. 2014 (1).

42

Meghir, C., D. Vayanos and N. Vettas (2010), “The Economic Crisis in Greece: a Time of

Reform and Opportunity”, mimeo, www.greekeconomistsforreform.com

Nicoletti, G., Scarpetta, S. and Boylaud, O., (1999), “Summary indicators of product market

regulation with an extension to employment protection legislation”, OECD Economics

Department Working Papers, No.226.

Nickell, S., (1996), “Competition and corporate performance”, Journal of Political Economy,

104, 724–746.

OECD, (2001), “Regulatory Reform in Greece”, OECD Reviews of Regulatory Reform.

OECD, (2009a), “Indicators of Regulatory Management Systems”, Regulatory Policy

Committee.

OECD, (2009b), “The role of communication infrastructure investment in economic

recovery”.

OECD, (2011), “Economic Surveys: Greece”, OECD Economic Surveys - "Functional

Review of the Central Administration in Greece".

OECD, (2011), National Broadband Plans – “The Economic Effects of Broadband Access”

OECD (2013), “Recommendations for future action by the Russian authorities to improve

Competition law, policy and practice” report prepared by OECD Competition Committee.

OECD (2014), “OECD Competition Assessment Reviews: Greece”.

Ofcom, (2009), “Accessing the Internet at Home”, Research Document,

http://stakeholders.ofcom.org.uk/binaries/research/telecoms-research/bbathome.pdf

Pototschnig A. (2012) “Electricity Markets: the Wholesale Electricity Market”, Florence

School of Regulation, R Schuman Center for Advanced Studies.

Qiang, C., and Rossotto, C., “Economic Impacts of Broadband”, Chapter 3 in Information

and Communication for Development 2009: Extending Reach and Increasing Impact’, World

Bank.

Rosston, Gregory L., Scott J. Savage, and Donald M. Waldman (2010), “Household demand

for broadband Internet in 2010”, The BE Journal of Economic Analysis & Policy, 10(1).

Sala-i-Martín, X. and Artadi E. V., (2004), The Global Competitiveness Index. The Global

Competitiveness Report 2004–2005. Hampshire: Palgrave Macmillan. 51–80

Scarpetta, S. and T. Tressel (2002), “Productivity and Convergence in a Panel of OECD

Industries: Do Regulations and Institutions Matter?” OECD Economics Department Working

Paper No 342.

Van Reenen, J et al, (2010) “The Economic Impact of ICT”, Enterprise LSE.

Venables, A.J., Van Wijnbergen, S., (1993), “Trade liberalization, productivity, and

competition: the Mexican experience”, mimeo, Centre for Economic Performance, London

School of Economics.

Williamson et al, (2010) ‘Demand side measures to stimulate internet and broadband take-

up’, Plum Consulting.

World Economic Forum, The Global Competitiveness Report 2001-14