Tied up in knots

IN DOMINATING the debate over how to address the Greek crisis, Germany has shown that economic success brings political influence, which it wielded last weekend to brush away requests from France and Italy for more lenient treatment of their neighbour.

Not everyone loves German rigidity, but Europe should be grateful for it. While we don’t yet know whether the latest accord will stick, let alone succeed, the requirements are necessary to bring the Aegean country back to economic health and to save its participation in the common currency.

Too often, the debate over Greek economic policy is oversimplified into a classic macroeconomic tussle between “austerity” and “stimulus”.

Prudent fiscal policies are, of course, central to a well-functioning economy. What has been given less attention – but is equally important – is the need for structural reforms in Greece’s inefficient, overregulated economy.

Take medications. Greece is one of the few European countries that sets prices for over-the-counter drugs, which can be sold only in licensed pharmacies. Pharmacies must be owned by licensed pharmacists and they can each own only one.

Meanwhile, entry is restricted in a flotilla of fields including taxi and truck drivers, engineers, notaries, actuaries and bailiffs. Most shops are required to close on Sundays. Greece is the only country in Europe that, by law, limits the shelf life of milk to five days, leading to higher prices and restricted choice for consumers. Bakeries can sell breads to consumers only in a few specified weights. And on and on.

Some experts say that Greece should pick up and leave the euro so that it can reinstitute its own currency, which in turn would allow for monetary devaluations aimed at making the country’s exports more competitive.