Entrepreneurship in Greece: Policy RecommendationsHowever, the policies that have been proposed by the IMF and have been applied in Greece so far, have increased tax rates, changed more than once the employment and insurance status, “froze” market psychology, due to public and private sector wage cuts and did almost nothing to lessen bureaucracy. It also striking that wage cost is not considered an important barrier by business owners. Many businesses have cut wages and fired personnel, in an attempt to minimise costs and escape closure, but this is due to the fact that businesses themselves cannot change any of the important barriers they face.
Another research on the same topic was carried out by the World Economic Forum in 2010. From a list of 15 factors, respondents were asked to select the five most problematic for doing business in their country, and to rank them between 1 (most problematic) and 5. From Table 18 again we notice that most barriers are related with the state. The most problematic factor is government bureaucracy (27.2%), followed by corruption (14%) restrictive labor regulations (12%), policy instability (11.5%) and tax regulations (11.1%). Access to financing was also considered a problematic factor for businesses. Finance challenges

Entrepreneurship plays a vital role in the Greek economy, as about 15% of the active populations are entrepreneurs. Most of the entrepreneurs have micro enterprises, which make up 96% of Greek businesses. These micro enterprises, offer 33% of the total business sector value added and occupy 58% of the business sector workforce SMEs in total offer 75% of total value added and occupy 77% of the total private sector workforce. However SMEs prospects at the moment are not good. During the last four years, at least 100 000 businesses have gone out of business and about 200000 employees have lost their jobs. For 2012 another 50000 businesses are expected to close due to the recession, adding up more unemployed to the economy.
Large enterprises even though they are only 0.1% of total enterprises, they offer 24.9% of the private sector’s total value added and occupy 13.6% of total private sector workforce. Even though the number of large enterprises has increased during the last years, the number of employees has decreased by 34380.
As the role of the SMEs is vital for economic growth and innovation in every economy in the world, the Greek government must support them with every mean possible. The government should aim at abolishing the most important barriers met by Greek enterprises. According to the business owners, these are tax rates, employment and insurance status, market psychology and state bureaucracy.
The policies that have been proposed by the IMF and have been applied in Greece so far, have done exactly the opposite: they have increased tax rates, changed more than once the employment and insurance status, “froze” market psychology due to public and private sector wage cuts and did almost nothing to lessen bureaucracy. Notably, wage cost is not considered an important barrier by business owners. Many businesses have cut wages and fired personnel in an attempt to minimise costs and escape closure, but this is due to the fact that businesses themselves cannot change any of the important barriers they face.
As three out of four barriers originate directly from the government, while the other one, market psychology, can be tackled by government action, there is an urgent need for the Greek government to proceed to some decisive measures: lowering of taxes, minimization of the state bureaucracy and corruption, establishment of fair and effective employment and insurance laws and finally increases in wages, so as to increase buying power, are some of the basic policies that need to be followed in order to secure SMEs’ short term survival and long term prosperity. The formation of more public private of mixed ownership large enterprises, would also be very helpful for boosting domestic productivity and employment.

Table 18: Problematic Factors for Doing Business in Greece

Factors % of Respondents
Inefficient government bureaucracy 27.2%
Corruption 14%
Restrictive labor regulations 12%
Policy instability 11.5%
Tax regulations 11.1%
Access to financing 9.9%
Inadequate supply of infrastructure 3.9%
Tax rates 3.7%
Poor work ethic in national labor force 2.3%
Government instability/coups 2.3%
Inadequately educated workforce 1.4%
Inflation 0.6%
Crime and theft 0.1%
Poor public health 0.1%
Foreign currency regulations 0%