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Liberalization of Closed Professions: Opening Pandora’s Box

George Zohios, Mar 30, 2011

On February 16, 2011, the Greek parliament plenary passed a bill on liberalizing so-called "closed professions." The deregulation of closed professions, which has drawn strong criticism both from the opposition parties and members of the closed profession categories that will be opened, is one of the most important demands made by the International Monetary Fund and European Union in exchange for Greece's drawing on the EUR 110 billion bailout to avoid sovereign debt default.

According to the Greek Prime Minister during his address to the cabinet, opening up closed professions represents a historic change to the benefit of society, since it guarantees new business and growth opportunities. Further, it will boost Greece's competitiveness, which means new jobs, growth, cheaper products, and better services for citizens and businesses.

The new law abolishes regulations on a large number of closed professions, sweeping away rules that govern everything from minimum fees to geographical restrictions to the number of permits issued each year. The focus of the legislation is mainly on a handful of key linchpin sectors-such as lawyers, auditors, engineers, architects, and notaries-but the scope of the plan is designed to invigorate the overall Greek economy.

To be more specific, according to the current legal regime, liberal professions are subject to pervasive public regulation that cover many aspects of professional activities, among which are the exclusive exercise of certain functions, entry requirements and access mechanisms, minimum price determination, prohibition of advertising, etc. Each profession is protected from competition by a tangle of regulations and licensing requirements that have resulted in high prices for consumers and a reliable living for insiders. For instance, Greece has issued only a few new licenses for truck drivers since 1970, though Greece's economy has more than tripled in that time. The consequence of this situation was a huge price increase in license acquisitions, which has been sold at prices approaching EUR 350,000. Not surprisingly, a report of the Foundation for Economic and Industrial Research ("IOBE") found that it was more expensive to truck something from Athens to Thebes, about 45 miles, than from Athens to Rome, a distance of more than 600 miles.

 

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