Insolvency Law as a Main Pillar of Market Economy - A Critical Assessment of the Greek Insolvency System
28 Pages Posted: 30 Oct 2014 Last revised: 17 Sep 2017
Date Written: October 30, 2014
In this article, we use the Greek insolvency law and its present status as a role model for the demonstration of the central role insolvency law generally plays within a given economy. The Greek example amplifies in a particular instructive way the interrelationship between the functionality of a legal restructuring and liquidation regime, on the one side, and the recovery of a state’s overall economic affairs on the other. We present our thoughts in a way that leads from general deliberations (A and B) to a description of the present Greek insolvency law (C) and, finally, its critical assessment (D), before we conclude (E).
In the assessment we find that Greek insolvency system fails to serve its main aims. The length of the procedure is excessive while the recovery rate for creditors is extremely low. At the same time, a large number of insolvent enterprises do not file bankruptcy or, alternatively, many bankruptcy proceedings are concluded due to insufficiency of assets. In such conditions, a lot needs to be done to restore bankruptcy’s purpose. While mainly in line with international practice, the system would benefit greatly from some amendments and the fine-tuning of some institutions. Especial importance would bear a redesign of the system of priorities, or a reprofiling of the mechanisms to commence insolvency cases. Further, both procedural shortcomings as well as shortages in the institutional framework play an immense negative role. The malfunction of the Greek insolvency system is not only the result of deficient regulation and/or an imperfect institutional setting; in the current state of Greek economy, external factors make the fulfillment of bankruptcy’s purposes even harder.
Keywords: Insolvency, Greece, Restructuring, Liquidation, Market Economy, Institutional Setting, Insolvency Practitioners
JEL Classification: K1, K3, K4
Suggested Citation: Suggested Citation