Opinion

The Great Debate

Why regulation — on yogurt and more — is blocking Greece’s recovery

By Peter Gumbel
March 11, 2014

The news that Greek-style yogurt maker Chobani is looking to sell a minority stake that would value the company at around $2.5 billion should in theory be a big boost for Greece’s beleaguered dairy industry.

But instead, the main beneficiary will be Chobani’s Turkish founder, who operates the company in upstate New York, and who has proved to be innovative in a way that Greek dairy farmers are not. In fact, they are so stuck in their traditional ways that it’s actually illegal in Greece to call low-fat yogurt “yogurt.” Any variant that contains additives of any sort must be labeled “dessert of yogurt,” which is akin to waving a warning flag at consumers.

That sort of rigid regulation is the norm in Greece, and not just in agriculture. Examples abound. There’s a rule dating back to the 1970s that prohibits producers of apple vinegar from packaging it in anything other than one liter bottles. Another set of regulations, this time from the 1980s, outlaws bulk sales of mayonnaise and the import of some types of cloves. Supermarkets are prohibited from selling aspirin. Fresh milk is required by law to have a shelf life of just five days. As for olive oil, one of the staples of the Mediterranean diet and an important source of revenue for the Greek economy, producers are strictly forbidden from blending it with vegetable oil for domestic consumption. The rationale: olive oil is at the core of the Greek diet, and the health of the population is at stake.

These rules are among the hundreds of restrictive business practices in Greece that a team from the Organisation of Economic Cooperation and Development identified last year, as part of an 11-month investigation commissioned by the Greek government. In its report the OECD made 329 recommendations for rules that should be changed to open up competition and give a much-needed boost to the economy.

Quantifying the cost of these restrictions is a difficult task, but in 66 cases, the international experts did figure out a way to do so. Eliminating them would lead to a positive effect on the Greek economy of 5.2 billion euros, or just over $7 billion, they calculated. While that may not seem like a huge sum, in today’s Greece, every penny counts. Kostis Hatzidakis, the Greek minister for Development and Competitiveness, is promising action “very soon” to retire some of the most intrusive rules that he says are holding back his nation’s competitiveness.

That is easier said than done, and not just in Greece. In many European nations, a similar patchwork of rules limit competition, protect existing monopolies or otherwise restrict businesses for sometimes archaic reasons. In France, for example, there’s currently a battle raging between retailers wanting to open on Sundays and labor unions who have successfully filed court actions to stop them.

John Van Reenan, director of the London School of Economics’ Centre for Economic Performance, says this sort of overregulation holds back innovation and economic growth and explains, in part, the gap in material wealth between Europe and the United States. “It’s a very big issue,” he says. “It takes a lot longer for European business to grow and achieve scale.”

Certainly, there’s evidence that attacking producer monopolies and eradicating archaic restrictions can boost economic growth. Australia began doing so in 1995, with the creation of an independent “Productivity Commission.” The commission has calculated that over its first 10 years, the changes put in place — especially in key infrastructure sectors such as electricity, urban transport and communications — increased Australia’s gross domestic product by about 2.5 percent.

Even by European standards, Greece stands out as having especially tangled regulation and glaring inefficiencies. For example, as a result of the rule that gives pharmacies a complete monopoly on sales of all over the counter drugs, including dietary supplements, there are three times the number of pharmacies per inhabitant in Greece than in the EU on average, the OECD found.

But changing that state of affairs is controversial. Many argue that tradition is more than just a question of economics, but a way of life. Minister Hatzidakis is facing pushback for his reform plans from several cabinet colleagues — and intense pressure from industry lobbies. On March 10, the Panhellenic Pharmacists’ Union began a two-day strike to protest the plan to allow supermarkets to sell aspirin and some other drugs, holding up placards in central Athens reading “health is a human right.” Among their arguments: consumers may unwittingly overdose if drugs become easier to purchase.

Some of the biggest fuss has been prompted by the recommendation to allow producers to blend olive oil with vegetable oil. These blends are currently exported, but are not allowed to be sold in Greece itself — even though Spanish and Italian blended oils are on sale there. During a debate on the issue in parliament, one MP, Fevronia Patrianakou, termed the proposal “a cause for war.”

Another highly controversial recommendation is to end the statutory 5-day maximum shelf life for fresh milk — a rule that the OECD says actually means some far-flung Greek islands never get any. In other EU countries, shelf life is usually set by producers themselves, based on hygiene norms. So far, Greek dairy producers are lobbying against the change, with support from the Agriculture Ministry.

The pushback isn’t surprising. “The usual argument by insiders is that the world will fall apart if anything changes,” says Prof. Van Reenan of the LSE. “But that’s a smokescreen for protecting oligopolies.”

Ultimately, the Greek producers may be the main beneficiaries, even if it means they have to change. Clinging to old ways of doing things and keeping out competition can be lucrative, but it’s a crimp on innovation.

Just ask Chobani’s multimillionaire founder.

 

PHOTOS: Paraskevas Christoforakis, 35, stands by his shop inside the medieval castle of Monemvasia May 29, 2012. REUTERS/Yannis Behrakis 

A worker puts sun-dried tomatoes in glass jars at the Gaea food company in the central Greek town of Agrinio, some 280 km (174 miles) southwest of Athens February 28, 2012. REUTERS/Yorgos Karahalis 

Comments
5 comments so far | RSS Comments RSS

Here are some comments from a Greek-American Nutritionist and Journalist, currently living in Athens. First I would like to clarify that there is in fact no law that does not allow low-fat yogurt, to be called yogurt. Low fat yogurt in Greece is called plain yogurt. The law states that any additives such as gelatin, sugar, sweeteners, fillers, starch not to be called yogurt. This is actually of benefit to the consumer as opposed to the US where many yogurts are hardly yogurt anymore with all the additives.

Secondly, the blended olive oil proposal, was a generic proposal which is not supported by any concrete numbers, nor does it take into account the relationship of Greeks and olive oil, but also the reputation of Greek olive oil. You see Spain and Italy already have established identities for their olive oil brands. Greece has not, and allowing this blending would in essence ruin any reputation that Greek olive oil has established thus far. Will these new blends be cheaper? There is no evidence that they will be. Will new blended oils even be marketed as healthier or innovative? Probably. We have seen how these oils are promoted in other countries particularly in the US and UK. And really, why would a country that produces high quality olive oil, taint their product by adding various questionable vegetable oils? Greece needs to maintain the integrity of its olive oil.

Finally, I agree that many regulations are outdated and should change, but these regulations have to do with internal (in Greece) production, so this has really nothing to do with Chobani’s success compared to Fage’s. We are talking about 2 companies with production plants in the U.S.

Posted by E.ParavantesRDN | Report as abusive
 

I won’t judje your initiative with a suspicious mind
I agree with that wrong practices led to wrong and unfair laws
To tell the truth then: Bad Initiative-Corrupted Politicians-Unfair Laws BUT,
It’s rather naive not say dangerous to put in the same box all these different products and services without make a research of the native ethics. I can’t see the point of “fresh” sign on food or milk or anything if it was prepared 15 days before, because it isn’t. Using he “reducing costs” anvil we turn green to yellow and then to black. Then we use the media (like yours) to fanfare the “wrong” practice which it is wrong but for different reasons.
Instead research a little about Milk “cartel” in Greece and milk prices. Prices won’t fall if we change the “SIGN” , but if we change the sign “meaning” we can reduce the quality drop bits of the price and everybody is happy. Now regarding yogurt, http://allrecipes.com/Recipe/Beef-and-Ir ish-Stout-Stew/Detail.aspx?evt19=1 the link provide the recipe for what it says Beaf Irish Stout, if I add Apples inside or Chicken, instead of Beaf this isn’t the recipe.You can run Windows on Mac it’s not prohibited but it’s not sold Dual Boot and it’s isn’t Mac anymore.
Some far island doesn’t get any, because Greek “Shiplords” with the blessing of the state, made the transportation fees DEVASTATING. Not a word for this Cartel too…And finaly , medicines.If you ask Doctors and patients around Greece, most of the times they will say generics -genosima in Greek-isn’t bad or it’s the same, but there is data about some that is dangerous and in the best case they don’t do what they should. Why that happened after the Greek Crisis , I dare ask, or shall I say EU crisis. Research is the 1st part of true story, not doing it in all aspect with sources and proof is usually the opposite.

Sorry for my rusty English.

I am not an expert on any of these fields, but if you taste bad olive oil on your salad , eat a bad replica yogurt you will not get ill… but if you do, sent me an email and I will dispatch some of our finest generic drugs, I am sure you will skip it and not for the oligopolies.Thanks for the time and space.

Posted by Panagiotisz | Report as abusive
 

So in essence: it is fine to do so if its Cognac, Roquefort, Parmesan Reggiano, but, for Greek yogurt (where “Greek” denotes the goat type, the process etc.) and the protection of that product line-as they are unique-is just, say, unacceptable? Just not long ago, Canada (of all places on earth!!!) almost banned Greece from using the name FETA for the Greek invented, produced, traditional cheese. Of course, not that they where first, the Danish almost succeeded doing that years ago. I wonder what purpose does this article serve, as Reuters, should be clearly informed of the surrounding lit before publishing an article.

Posted by decadentP | Report as abusive
 

interesting piece, but marred, as previous commentator noted, by error about lowfat yogurt. I am in Athens and just had some delicious Total 2% made in Greece yogurt.

Posted by stsebastian | Report as abusive
 

Best yogurt maker in Turkey. Yogurt Recipe http://www.pasta-arifi.com

Posted by pastatarifleri | Report as abusive
 

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