Photo: Milos Bicanski / Getty
The pictures of Athens on fire are making their way around the web. Crowds gathered in Syntagma square all of Sunday in protest of the new austerity measures, while hooded vandals burned buildings down with Molotov cocktails, causing absolute destruction to countless businesses.Inside the parliament building lawmakers passed the second memorandum calling for more austerity measures to be put into place, a last ditch effort to somehow make Greece’s debt sustainable by 2020.
This is the second go at austerity; the first measures passed in 2010 were never really implemented. Since that time the situation has gotten a lot worse, leaving the country at the brink of a chaotic default on loans incurred during 20 years of endless borrowing.
This new round of austerity is meant to right the wrongs of decades of wasteful spending and make Greece a more competitive member of the developed world. If competitiveness cannot be created through production and innovation than the market (EU partners in this case) will force competitiveness in
unsettling ways. You are either competitive through the products you make and efficiencies you create, or you just do things on the cheap; cheap labour, cheap costs, cheap prices.
To avoid the cheap way out, you need to create an environment where you produce great things. Over the last 20 years in its European journey, Greece forgot how to make stuff. Society traded in creation for the perceived safety of a large government blanket. The irony in all of this was that the risk free lifestyle promised by the state (in exchange for votes), was the very model that brought about the chaotic instability we see today.
The Greek system rewarded cronyism and shunned the very people who dared to strike out on their own — the entrepreneurs. The Greek state made sure that entrepreneurs with dreams of building better businesses were made to go through difficulties not often encountered in most developed nations.
It sounds crazy but the last thing you wanted to be in Greece was an entrepreneur. The Greek system looked down upon risk takers. The entrepreneurial instinct to problem solve and disrupt the market, for the better, went against the status quo mentality that kept the populace in a numb state of uncreative bliss and the politicians in their powerful and profitable positions.
Whether you agree with the austerity or not, Greece now has to change and become more competitive. If austerity is the medicine to bring costs under control, then entrepreneurship is the drug to bring growth back.
In order to help entrepreneurs execute on their business idea, the Greek system has to make three basic structural changes that will help businesses grow and create jobs in new innovative industries.
1. Lower social insurance and tax contributions.
Greece has one of the highest social insurance and employee tax contributions of any developed nation. These payments are made by an employer to the government every month and cover every salaried employee. The problem with these payments is that they are ridiculously high and suck out the air of
any small business or start up. To put it into perspective, an employee who nets 1,000 Euros, costs a business 2,000 Euros; 1,000 Euros to the employee and 1,000 Euros to the government.
It’s a lose-lose scenario. Start ups cannot afford to pay higher salaries as they are burdened with this high government contribution and employees receive less net income in their pockets. This is less money poured into the economy in the form of consumer spending.
Some argue that this money is essential for keeping the health care and pension system is tact, but in reality the above systems are in shambles and the money allocated to such funds are mostly wasted on inefficiencies and corruption built into the current government structure.
Lower the social insurance and employee tax obligation for small to medium size businesses. Take the bold step to even relieve start-ups of this expense altogether, so as to help them control their expenses, hire more resources and compensate employees better.
2. Create a better balance between employer and employee rights.
Greece built a socialist system that empowered employees in the public and private sector with absolute job security and full legal cover. Meanwhile employers were villainized by the media and unions, stripped of many legal rights and handicapped in their ability to operate in a competitive European and global market. Hiring became more of a covenant between state and employer rather than an agreement to provide services for monetary compensation between two entities. Firing is a scenario that requires due diligence, massive amounts of paperwork and good legal council in the fear of legal repercussion that result in heavy business fines and no appeal recourse.
The headaches and risk to open up shop in Greece are just not worth the legal risk. Greeks need to finally realise that employers are not the enemy; they are the lifeblood to job creation and economic prosperity. So many great ideas are never brought to light and so many entrepreneurs never get to build their product
because of the inherent imbalance in the employer-employee relationship. Employers need to be given a more flexible and fairer environment to operate in so they can build the right team and put the proper human capital pieces in place to build bigger and more competitive businesses.
3. Make it simple to start a company and close a company.
Finally the most fundamental of ways to increase entrepreneurship is to make the company creation process simple and straightforward. Much praise can be said for those nations that help their citizens to get their business established in a prudent and efficient manner, Greece is not one of them.
Greece has always been a difficult and expensive place to incorporate, and while it has become a bit easier over the years the process still needs to be streamlined. You should be able to open a business and incorporate in less than a day, and even over the Internet, at a cost that should not exceed a few hundred Euros.
Likewise it should also be just as easy to close your business down. Making it easy to shut down a business that is failing is critical for many reasons. It helps flush out the good ideas from the bad. It removes the stigma of failure and makes the journey towards success less risky and fearful. It gets entrepreneurs back into the market, ready to proceed to their next idea, and ready to begin afresh with a new team and new employees.
There is a long uphill battle for Greece that lies ahead, but maybe, just maybe, changes can take place that will mobilize the visionaries that do exist and who can build great companies that will alleviate much of the destruction that a failed system and societal mindset has brought on to this once proud and creative
culture and nation.
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