particular, regulation of prices in the utility industry. in addition, freedom of entry carries the risk of excessive duplication of facilities and only temporary competition at best, because any firm that increases its scale will have lower average costs than its rivals and will ultimately “ price them out of the market ”. the existence of one firm, left unregulated, will then lead to monopoly prices. to avoid the “ twin evils ” of wasteful competition and market prices which exceed minimum long - run average cost, public regulation is often used instead of market competition. a possible flaw in the economic rationale for government regulation is the notion that a natural monopoly provides a logical basis for monopoly prices. even though efficiency considerations dictate that only one firm exists in a natural monopoly industry, the use of some form of competitive bidding will force the unregulated firm to charge a competitive price. the co - existence of monopoly power and monopoly structure is possible only if the costs of negotiating are differentially positive for potential rivals and if the rivals do not have the same access to the necessary inputs at market prices. franchise bidding for public utility services, however, are likely to encounter the same problem associated with regulation. first, given the long run nature of the assets employed by public utilities, long run considerations are important in franchise bidding. writing contracts that ensure reasonable performance over the contract life would be very costly. second, since it is not possible to incorporate every single detail explicitly in a contract, renegotiation over time is necessary. the necessity for contract renegotiation implies that franchise bidding would come to resemble conventional regulation. thus, extensive scale economies relative to the size of the market make a monopoly the natural outcome of competitive market forces – a case of market failure due to economies of scale. because of market failure, the price system no longer conveys the necessary information to ensure efficiency. given this assumption, an unfettered market cannot be relied upon to produce an outcome with any particular optimality properties. the alternatives bis central bankers ’ speeches are for the government to either regulate the industry ( public regulation ) or nationalize the industry ( public monopoly ) or do nothing ( laissez - faire ). the usual normative prescription has been government regulation. substituting a regulatory agency for the free market is premised in part on the belief that a regulatory agency can, at a relatively low cost, determine an efficient set of prices. hence, optimal pricing is an integral part of any discussion

putting it fiscal affairs in order? “ i am glad that you are asking this question. the program from the beginning consisted of two pillars : the fiscal side and the “ growth enhancing ” structural reforms side. on the fiscal side, i think we have really seen significant progress. it is a significant progress compared to any other fiscal adjustment after world war ii. it was necessary because of the unsustainable fiscal situation and we have to pay respect to the efforts. during my talks i received an update about the fiscal situation after the first seven months and if it continues like this, a primary balance by the end of the year as the program foresees is in reach ”. the main problems though are centered on the structural side of the program. even the present greek government, which has shown a clear commitment, does not seem to have full ownership when it comes to structural reforms. you know very well what happened with the “ mobility scheme ” in the public sector, you have also seen what is going on with privatizations. how can these shortcomings be overcome? “ my impression after the talks i had is that there is a clear commitment to the program. and i made it very clear : this is not the program of the troika, it is the program of the greek authorities. i acknowledge that many things have happened and at the same time more needs to be done. the main issue for the citizens is : do you create growth and jobs? we have reached levels of unemployment which are unacceptable and one should focus on the structural reforms side to increase competitiveness and create jobs, especially for the young. what we see is that wages are decreasing but we are not seeing a similar movement downwards for prices. this is a sign that there is not enough competition in the economy ”. when you mention this to your interlocutors in athens, what do they answer? “ i cannot speak for them but my impression was that they are aware of this problem and are willing to tackle it. if you look at the most recent data, it is in reach to have a moderate but positive growth next year. but one has to show perseverance on this kind of reforms and not unravel what has been achieved ”. we understand that the next troika review will be extremely difficult. both mr. samaras and mr. venizelos are insisting that no new measures, meaning cuts in wages or pensions, are going to be taken although we have heard this