The International Monetary Fund left the new Government a “memo” yesterday, criticizing the minimum wage increase and the abolition of the subminimum wage.
In particular, when it comes to Greece, the IMF continues to detect a need for maintaining and extending flexibility in the Greek labor market, strengthening competition in the service and product markets and improving the business environment, as shown by the Article 4’s report on Eurozone’s economy that was made public.
More or less, the IMF reports that 2011’s key reforms were reversed in August 2018, as the minimum wage increased by 10.9% and the employees’ subminimum wage below the age of 25 was abolished. “These changes increase the risks of employment boost and competitiveness,” the IMF notes
On this basis, the IMF argues that more flexible labor market policies need to be promoted, especially through the prevalence of business contracts instead of sectoral ones, while also there is a need for a regular assessment of cases where collective bargaining is warranted.
The International Monetary Fund also stresses the importance of reducing businesses’ non-wage costs, and says there should be an acceleration of reforms so that the burden of taxes and levies can be reduced, alongside the cost of money for Greek businesses.
Specific recommendations are also being made by the IMF for the business environment to be improved. The IMF says these reforms are important to boost the economy’s productivity and to address future challenges such as low levels of investment, slow capital growth and demographic change.
From now on, competitiveness in the product and service markets as well as the improvement of the business environment constitute the second area of necessary reformist interventions. According to the IMF, progress has been made in some areas, such as the partial liberalization of professions or the easing of restrictions on trade. However, it notes that, although important legislative recommendations have been adopted, their implementation still remains weak. It also adds that, while investment licensing procedures have been simplified, critical areas remain outside the new framework.
For this reason, the IMF recommends the regulated professions framework’s re-evaluation in order for distortive effects on price competition to be addressed. In addition, it asks for a new regulatory framework for product markets, regarding especially the secondary legislation, meaning circulars and Decisions, as well as for the Competition Commission’s powers to be strengthened in order for distortions to be detected. / Ibna