ABSTRACT
The large migration of small and medium enterprises to nearby Balkan countries in search of cheaper operation costs was another testimony to structural rigidities in the Greek product and labor markets. The Greek government was requested to send regular reports on its fiscal consolidation efforts and performance for approval by the Commission and the Council of Ministers under the threat of fines and cuts in Community subsidies. The new government led by Costas Karamanlis presented a program of structural reforms aiming at creating a business-friendly regulatory environment that would increase Greece's competitiveness, create new jobs and further improve the rate of economic growth. One of the government's first decisions was to order a fiscal inventory at a time when the European Commission was raising doubts about the reliability of Greek fiscal data. The New Democracy government did little to open markets and improves administrative inefficiency, which could have addressed Greece's persistent structural rigidities.
