Social dialogue and public pension reform in Greece and Turkey

Abstract

This article explores the involvement of organized social actors (trade unions and business groups) in the reform of public pension systems in Greece and Turkey. Most early studies of the reform of welfare policies perceived benefits in a consensual policy process, but more recent neoliberal literature has been critical of the political involvement of trade unions. On the basis of interviews with actors involved in the reform process in Greece and Turkey, I conclude that the effectiveness of social pacts is contingent on the financial, political and organizational resources available to the actors involved.

Keywords

Austerity Greece pension reform social dialogue social pacts Turkey

Introduction

Public pension schemes are widely regarded as ‘politically constructed property rights’ (Myles and Pierson, 2001: 305), which have enhanced solidarity among social groups, and also between generations. However, demographic change in a context of pressures on public budget constraints has made them a key focus in the restructuring of welfare states. The process of reform has varied in different national contexts, but has generally tended to provoke political controversy and conflicts among social actors.

Much writing on the reform of welfare policies has emphasized the importance of involvement of societal actors in a negotiated policy process. Recent debates informed by new institutionalism have tried to explain cross-national differences and similarities in policy processes and outcomes with respect to the policy influence of social parties. Context-specific domestic political factors (institutional, organizational capacity and strategies or perceptions) are key explanatory variables (Pierre, 2005; Wailes, 1999). There is also a growing body of parallel but critical literature using the same variables to explain the decline of social pacts as an outcome of the global economic crisis and the triumph of neoliberal policies (Baccaro and Howell, 2011; Culpepper and Regan, 2014). This shift reflects how social policies have been subordinated to economic imperatives within specific processes of re-commodification, cost-containment, rationalization and recalibration (Pierson, 2001: 422–427).

I contribute to these debates by examining pension reform in Greece and Turkey. It asks whether the involvement of organized societal parties, particularly trade unions, has helped shape the reform of systems. In both countries, social parties have been part of the reform process through social dialogue mechanisms; however, their involvement has not been translated into a real impact on policy. Organized social actors have an interest in pension reforms, but their capacity to influence the course of policy change has varied depending on the financial and political resources available and the socio-economic conditions in which they are situated. This study suggests that context-specific factors should be taken as particular forms of causal interaction between historically shaped state-society relations and the broader policy environment: the paradigmatic liberal turn mediated by the institutional structure of each pension system.

Ebbinghaus (2011) makes a useful distinction regarding the forms and mechanisms through which trade unions may influence the policy process, between the ‘more or less formal consultation of organized interests by policy makers’ (p. 323) and social pact negotiations between organized interests and governments. In the former, the social parties possess limited veto power because consultation mechanisms provide no more than an exchange of opinions although they may contribute to the development of a shared understanding of policy problems and solutions and unions may ‘use non-institutionalized “veto power,” such as mass protests or even general strikes to fight unilateral pension reforms’ (Ebbinghaus, 2011: 316). With social pacts, on the other hand, policy-making is genuinely shared by parties to the process.

The two countries which I study share a number of crucial similarities with respect to the characteristics of their welfare systems and public pension schemes, the shared imperatives for reform and the formal policy process. Neither possesses a social-corporatist legacy, yet both countries have used social dialogue mechanisms in various policy reforms. They mainly differ with respect to the degree of relative policy influence of organized labour. Given the close political links that trade unions have established with main political parties, and relatively higher level of unionization and coverage, organized labour in Greece has possessed ‘non-institutionalized veto points’, enabling trade unions to block and delay the reform process although without any substantial influence on the outcome of reforms.

This study covers the reform process until 2008; in other words, it does not examine the more recent impact of the economic crisis, particularly severe in the Greek case. It is based on semi-structured interviews with the social and political actors involved in the process of reform (state institutions, political parties, trade unions, business organizations and other associations): 19 interviews were conducted in Turkey in 2007 and 15 in Greece in 2008.

The next section provides an overview of theoretical debates on the policy influence of social actors within social policy reforms. Then, I present the two cases and outline the organizational and political resources available to social groups. I next discuss how social dialogue within the pension reforms can be understood. The final section briefly considers how the global crisis of 2008–2009 has affected pension policies in both countries.

The literature on social pacts

Social pacts or tripartite concertation are a particular form of interest mediation, and also as a system of policy exchange. Policy concertation involves the integration of major economic interest organizations into the policy-making process through what Lehmbruch (1984) called generalized exchange. With the decline of welfare capitalism from the 1970s, these deals were useful in mediating social conflicts through a shared responsibility among peak organizations of trade unions, employers and the state (Streeck and Schmitter, 1992).

More recent social pacts on social policy reforms have been a functional equivalent of neo-corporatism, both in old corporatist countries such as the Netherlands and Denmark and in countries such as Italy or Ireland. In Central and Eastern Europe, another set of debates has emerged in order to understand this process. In the analysis of ‘partnership-based’ governance in Spain and Italy, in the absence of appropriate institutions, Molina (2006) underlines both the key role of the state and strategies of trade unions in particular in a learning process. For many scholars, the inability of/neo-corporatist theory to account for these developments is related to its conceptualization of corporatism in structural terms and its association with specific institutions of centralized and encompassing interest organizations (Traxler, 2004: 573). Baccaro (2003) indeed states that ‘while corporatism as a process appears alive and kicking, corporatism as a structure may be dead’ (p. 699).

However, Siegel (2005) argues that especially in the field of welfare reforms the impact of social pacts has been limited. Hassel (2009) identifies some factors that affect the outcomes: the macro-economic context (the severity of economic problems or budgetary restraints); the constellations of policy and power interests; and the organizational and mobilizing capacity of unions. Thus, constellations of interests and problems and the underlying preferences of parties may yield different adjustment paths. Baccaro and Simoni (2008) also note the significance of the relative power balance between governments and trade unions, while Molina (2006) focuses on the strategies and incentives of the parties.

Recent literature has been increasingly critical, highlighting the decline and even ‘the death of social pacts’, as a reflection of trade unions’ loss of power and of legitimacy within the broader society (Culpepper and Regan, 2014). Such studies suggest how the weakness of organized labour leads to a growing impact of employers and to unilateralism in the policy process.

Social pacts within the framework of pension reforms

It is on the basis of their capability to adjust to new socio-economic challenges that welfare states can remain sustainable by achieving a balance between commitment to welfare and equity on the one hand and efficiency and financial sustainability on the other (Scharpf and Schmidt, 2000: 6–7). Here, a central issue is the nature of the existing pension system. Bismarckian systems (as in Germany and Austria) involve state pensions whose level depends on earnings-related contributions paid over the working life. Traditionally (as in most European countries), these are traditionally pay-as-you-go (PAYG) systems, designed so that current employees cover the costs of current pensioners. A shift in the demographic balance between the two groups, however, causes a deficit which must be met by an increase in current contributions, a reduction in current pensions or a government subsidy.

Beveridgean systems take many different forms (as in Sweden as against the United Kingdom) but tend to involve two tiers: a basic state scheme which provides a minimum income (often flat-rate) and an occupational pension which may or may not be state-run. Since the institutional structures of pension systems differ, the impact of recent challenges has not been the same. Indeed, the process, timing, scope and outcomes have followed relatively distinct paths, given that the initial choice of the model more or less shapes the structure and nature of the pension system (Bonoli, 2000: 1; Clasen, 1997: 5). Hinrichs (2000) states that in pension politics, ‘the scope and the mix of adjustment strategies and thus eventually the allocative and distributional outcome is determined by the institutional design as well as by the interest of the political actors’ (p. 361). In other words, past institutional legacies make differences in the reforms adopted, and the extent of institutionalization may produce path-dependent policy change. In pension reforms, a radical shift from PAYG to a capitalized or fully funded scheme may not be available to policy-makers, not only because of implicit pension debt but also political opposition (Natali and Rhodes, 2008; Schludi, 2008).

Many studies have stressed the significance of a negotiated process of reform. In his analysis of the dynamics of reform in Bismarckian pension systems, Schludi (2008: 48) argues that ‘the powerful pressures for cost-containment collide with equally powerful forces defending existing institutional arrangements and entrenched benefit entitlements; hence reform outcomes depend on whether the government can obtain political support’. Natali and Rhodes (2008) also highlight how the success of reform proposals, especially in continental European countries, has been conditioned by the moderation of institutional veto points. Myles and Pierson (2001) consider a ‘new social contract’ or ‘negotiated settlement’ an essential part of the reform process.

Greece and Turkey

State-society relations

The Greek experience of welfare state restructuring has been labelled as ‘reform by instalments’ (Tinios, 2005), given problems of government capability, the weakness of policy communities, the prevalence of low-trust sectional interests and the lack of social capital (Featherstone, 2005; Lyberaki and Tsakalotos, 2002). From the perspective of public-choice theory and rational-actor institutionalism, it is argued that the fragmented structure of the social security system reproduces inequalities, and each sectional group defends its own privileges and attempts to block reforms.

In understanding the limits of social dialogue, the legacy of the state corporatist past is of great significance. Greece experienced an uneven and late economic development steered through a direct role of the state, with strong protectionist policies and extensive regulations (Kritsantonis, 1992: 601–603), constituting a form of state capitalism (Zambarloukou, 2006: 215). Selective policies worked in favour of particular sections within the society. The political influence of the organized interests of labour and business reflected the uneven role of the state within the society, which in turn has given way to asymmetries in their sphere of influence.

Under the domination of the monarchy, army, conservative governments and dictatorship, state corporatism conditioned the mode of interest mediation until 1974. Even after the transition to democracy, state surveillance over society continued until the adoption of more liberal measures from the 1990s. Lavdas (2005) emphasizes the problem of the legacy of disjointed corporatism as ‘reproduction of a pattern of power relations relying on weak and asymmetrical penetration of state apparatus’ (p. 309) developed under the legacy of an asymmetric corporatist past (Lavdas, 2005). This asymmetry mirrors the relative autonomy of business interests towards the state and political parties, while trade unions have been subject to state supervision. Political factionalism and internal fragmentation have further weakened their political influence.

Greek interest associations emerged after 1860 in the process of political modernization. Trade unionism was shaped by the extensive role of the state within the economy and the late development of an industrial working class. In 1918, the Greek General Confederation of Labour (GSEE) was established as the main (private sector) union confederation. It has been subject to political factionalism and over-politicization as a result of the influence of main the political parties, with factions linked to centre-left (PASOK), Nea Demokratia (ND), the orthodox communist KKE and today’s SYRIZA. There is another confederation for civil servants, Confederation of Civil Servants’ Trade Unions (ADEDY). Its historical evolution has shaped the nature of industrial relations: its legalistic character produced an uneven structure of social dialogue (Galinon and Marchington, 2006: 135).

The Greek experience of social dialogue, especially in the sphere of wage-setting in the 1990s, reflected the macro-economic framework set by Economic and Monetary Union (EMU). Hancké and Rhodes (2005) identify Greece as an example of ‘shadow pacts’ (p. 201) initiated for political and functional reasons under the pressures of high deficits and inflation rates. In the absence of strong labour market micro-foundations, the role of social pacts has been limited to consultation and negotiation in disconnected spheres. The highly fragmented and politicized organizations of labour and business groups, and the reluctance of parties to dialogue, have hindered the launch of any form of central pact.

The debates on social dialogue in Greece can also be evaluated with respect to a process of Europeanization of the Greek welfare state. Of key concern has been the integration of European social regulation at policy-making, institutional, legislative and cognitive levels. The emergence of new institutional structures and mechanisms can be evaluated within this framework. The policy developments have involved the establishment of a variety of tripartite institutions and consultative bodies, including the Economic and Social Council (OKE). This was created in 1994 to guide the social dialogue process, in line with European Union (EU) pressure for the coordination of social and economic policies (Sotiropoulos, 2004: 273–274; Yannakourou, 2004: 65–66). How far these institutional mechanisms of dialogue and consultation have brought a cognitive, discursive and behavioural change in the position of the social and political actors is questionable; Sotiropoulos (2004: 274) argues that the impact of these structures has been visible at a more cognitive level rather than in policy formulation and implementation.

The former head of Federation of Greek Industrialists (SEV) argued that,

The OKE was far from being effective; the government during my presidency did not provide any technical support or staff. During the formal social dialogue process in parliament, social parties were not even invited to express their recommendations; the social dialogue is mythical in this country. The pension issue is not just an economic question. After 20–25 years of working life you may react if you think that the government is not fair.

In Greece, union density has declined from 26.8 percent in 1999 to 21.3 percent in 2012 although collective bargaining coverage is high: nearly 85 percent in 2006 because of extension rules (OECD, 2014). There are discrepancies between sectors: the level is much lower in the private sector than in the strongly unionized public sector. Trade unions have been male-dominated, and representation of the female labour force and non-Greeks has been limited; thus, unions have been far from able to defend the encompassing interests of the working population (Matsaganis, 2007: 541–545). Although these factors have undermined union strength and bargaining power, the established clientelistic links with political parties and the ruling party in the decades following the democratization increased the sphere of influence of trade unions in political terms, especially during the period of PASOK domination.

In Turkey, corporatism (whether societal or state-based) has not gained ground since the interests of state has been clearly differentiated from the society. The labour movement has remained organizationally, politically and financially too weak to exert effective influence while business groups have adopted a rent-seeking position. The state displays a highly centralized monist structure, becoming autonomous from society in the course of state-led industrialization. Heper (1991) notes that the dominant pattern of interest politics in Turkey cannot be read as an example of state corporatism, but monism with a high degree of stateness. However, Bianchi (1984) argues that interest representation has involved an unusual mix of pluralist elements and state and societal corporatism, with coercive state initiatives to enhance ‘collaborative class relations’ (p. 145). Sakallıoğlu (1992) also mentions the existence of both state corporatism (early Republican period) and near neo-corporatism (1960–1980) within the process of the incorporation of trade unions into the political system. These views emphasize the leading role of the state under the conditions of delayed capitalist development, as even the first associations of socio-economic interests such as trade unions or chambers were established not through deep-rooted social movements with strong class consciousness but through the initiatives of the state itself. Until 1947, both the constitution and the law prohibited associations based on class interests. Even the 1947 law on trade unions recognizing the rights of trade unions was introduced with considerable restrictions in order to prevent the politicization of the workers’ movement. In 1952, the main current confederation, Türk-Iş, was established but a passive organization, dependent on the concession of welfare and legal functions.

The 1970s witnessed growing politicization and ideological polarization within society. With the establishment of the left-wing confederation DISK in 1967, the conservative and Islamist Hak-Iş in 1976, and the nationalist MISK (1970), the representational monopoly of Türk-Iş was weakened. The fragmentation within the labour movement has remained a persistent feature and prevented unity in action. Although the activities of civil servant unions were subject to anti-labour legislation after the military ultimatum in 1971, the power of labour was not totally eroded. There was even an attempt to secure a social contract in 1978 between Türk-Iş and the government of the time (Republican People’s Party) as part of a collective bargaining process within the public sector (Yıldırım and Çalis, 2008: 230).

The 1980s (following the 1980 military coup and introduction of 1982 Constitution) marked a problematic period for trade unions. The Labour Code of 1963, which introduced important legal concessions to unions, was replaced by a new Code in 1983 (Sakallıoğlu, 1992: 718). This was a period of deunionization and de-mobilization of both the left and labour movement (Çetik and Akkaya, 1999). It was only in 1989, together with the Spring Demonstrations and the wave of strikes against declining wages and living standards, that trade unionism gradually gained a political character. These years also witnessed the emergence of trade unions for civil servants such as KESK and Kamu-Sen.

An important control mechanism in Turkish industrial relations has been to design the collective bargaining system. Legislation in 1983, supposedly intended to create limited numbers of centralized unions, imposed a double threshold of membership at both national and company levels in order for a union to be recognized for collective bargaining. This obstacle contributed to the political and organizational weakness of trade unions (Çetik and Akkaya, 1999; Yıldırım and Çalış, 2008). Union density declined from 10.6 percent in 1999 to 4.5 percent in 2012 with an uneven distribution among private and public sectors and also along gender lines (OECD, 2014). Similarly, collective bargaining coverage is very low, estimated as 5.8 percent in 2006. Nor do Turkish unions, unlike those in Greece, have close ties with important political parties which might enable them to exert effective influence on proposed pension reforms.

The limited organizational capacity of labour in Turkey was emphasized by the interviewees. An official from Hak-Iş argued that because of the spread of flexible, precarious employment contracts, trade union membership can lead a worker to be fired. One official from the Ministry of Labour saw this as a reason for union compliance: ‘in the past trade unions undertook strikes for wage increases. Now they feel they must be more responsible so as not to lose their jobs’.

Formal tripartite dialogue mechanisms have been introduced at national level, mostly in the form of consultative bodies and regulatory committees. Formal bipartite mechanisms have developed only recently, with financial support from the EU, covering issues such as training, health and safety and vocational education. There are also other formal mechanisms and informal contacts among the social parties to discuss matters of common concern. However, Koray and Çelik (2007) argue that the existing diversity of institutions has hardly contributed to the development of a genuine process of social dialogue in Turkey. Indeed, this question has been an important issue during the harmonization process with the EU, as the poor record of social dialogue has been highlighted in the Progress Reports issued by the Commission since 1998.

Among these structures, most notable is the Economic and Social Council (ESC), established by government initiative in 1995 partly to ensure compliance with the EU acquis in the sphere of social policy. Its launch was also the result of the approval of the International Labour Organization (ILO) convention on tripartite consultation regarding working conditions in 1992. In principle, the Council was established as a consultative organ to achieve consensus among social parties and also to ensure their effective incorporation. Its formation relied on the consensus of both labour and employer confederations. However, according to Arslan (1998), the formation of the ESC should be viewed as an anti-crisis strategy in the political sphere to secure the compliance of labour confederations. It has never been a genuine tripartite body because of arbitrary government intervention in its functioning and membership composition, its restrictively consultative nature and the over-representation of government officials (Çetik and Akkaya, 1999: 218–222; Van der Valk and Süral, 2006: 29; Yıldırım and Çalış, 2008: 223–224). My interviewees also confirmed that the existing bodies of social dialogue have been of limited significance in the reform process. An official from the Ministry of Labour and Social Security emphasized that ‘the ESC is a consultative body. The government established it on the basis of its own will. If it is granted the right to make binding decisions like an executive organ it would lose its function’. An official of the civil service union Kamu-Sen evaluated this differently:

We try to state our concerns without calling strikes, but they just hear our opinions and the result does not change, as the government does what it plans. The ESC should meet four times a year. For the past two or three years the government has not called a meeting. This is just a punishment, as we criticized the prime minister in a meeting three years ago. The government acts against the law.

The welfare regime

Greece and Turkey have dissimilar welfare regimes and have not been compared systematically within cross-national welfare studies. Greece has a welfare state regime which is commonly classed as an example of the ‘Southern European model’ (Ferrera, 1996). Turkey still lacks an effective social protection system (Buğra and Keyder, 2006) and its insurance-based pension system experiences problems in maintaining financial balance and providing an adequate social safety net. The pension system has evolved in a fragmented manner together, with different benefit entitlement rules for distinct occupational groups has been accompanied. The family remains important as a social welfare institution.

However, both countries have relatively institutionalized Bismarckian PAYG schemes with earnings-related benefits, and budgetary restraints have driven their pension reforms (Auer and Popova, 2003; Featherstone, 2005; Sayan, 2006). The process has been politically contested in both countries. Neither country possesses centralized corporatist structures of interest mediation, and their industrial relations systems evolved under the tight control of the state and dense legalism. Formal mechanisms of social dialogue and consultation exist, but hardly function as socio-economic policy-making structures. Moreover, the persistence of patron–client relationships and of fragmented, dualist labour markets results in a division between insiders and outsiders, making genuine consensus among the parties to the reform process even more difficult.

Reforms

In Greece, demographic pressure has been an important challenge. Under recent reforms, voluntary private pension schemes were integrated into the system but their coverage remains limited. There have also been different sets of legislation: in 1990, 1992 and 2008 under the conservative ND government, and in 1998–1999 and 2002 under PASOK. The first measure, which followed an International Monetary Fund (IMF) report, was in response to fiscal deficits and a crisis in public finances. The other reforms were also driven by financial considerations. The 2008 law principally focused on institutional and organizational reforms (Featherstone, 2005; Gravaris, 2006; Matsaganis, 2006).

The 1990 law raised the retirement age for those insured after 1993 to 60 years for men and 58 years for women and prescribed increases in contributions. The 1992 law further increased the retirement age to 65 years both for men and women, again raised the contributions paid by both employers and employees and reduced the replacement rate from 80 to 60 percent. These measures also tightened the eligibility conditions for benefits and introduced new rules for workers insured after 1993 (Gravaris, 2006: 64; Matsaganis, 2006: 165–166; Petmesidou, 2006: 42; Sotiropoulos, 2004: 275–276; Venieris, 2006: 79; Vlachantoni, 2005). The PASOK government adopted two major social security laws, following recommendations by a committee to examine long-term economic policy under the EMU. Initial proposals for reform were withdrawn and more moderate measures adopted through the ‘mini-pension reform’ of 1998 (Featherstone, 2005: 743; Matsaganis, 2006: 165), followed by the 1999 law under which some of the occupational funds were amalgamated, eliminated or merged with the Social Security Institution IKA.

An expert committee prepared a new reform draft after PASOK was returned in the 2000 elections. The original draft of 2001 aimed to decrease pension deficits by a further increase in the retirement age from 2007, and further reductions in the replacement rate. Following trade union protests, the draft was modified to introduce changes mainly with respect to the pension rights of private sector workers covered under the IKA. For post-1993 entrants, retirement was set at 65 years and the replacement rate was fixed at 70 percent for all employees who were insured after 1993.

PASOK launched a formal social dialogue process towards the year 2000. However, the government proposals were opposed by the trade unions and subsequently moderated. The reform initiated by the ND government in 2008 which aimed at unifying the existing pension schemes was opposed by trade unions, but the bill was passed. In my interviews, the representatives of the social parties offered contrasting views in relation to their role within the reform process to those of government officials. The former head of the IKA stressed that,

It is under the political influence of the privileged groups like public sector and banking employees which have strong unions and political connections that it is difficult to introduce pension reform, since they do not want to lose their privileges. This is why the redistribution has become regressive, working at the expense of low-income groups specifically in the private sector and IKA pensioners in general.

For the representative of GSEE, however,

In 2001, the trade unions opposed some of the proposals and went on strike, held demonstrations and the government withdrew the proposal. In 1992 and 2007 the Conservative government prepared and passed the laws without taking the views of other political parties and societal actors …. Its position is in line with the European directives, neoliberal and neo-classical, but PASOK has a more balanced strategy between economic and social policies.

In Turkey, two laws to restore the financial balance of the pension system followed a report by the ILO in 1995 as part of the credit agreement financed by the World Bank (Kenar et al., 1996: 13). The 1999 law introduced a voluntary private pension scheme that took effect in 2003, imposed a phased increase in the retirement age and raised the minimum period of contributions for full pension entitlement (Karayel, 2006; Sayan, 2006). The reform was imposed unilaterally with minimal consultation, under the emergency conditions of the 1999 earthquake, despite protest actions by the trade unions.

The 2004 ‘White Book’ of the conservative Justice and Development Party (JDP), in power between 2002 and 2015, initiated a comprehensive reform process, creating a new Social Security Institution (SGK) as an umbrella body unifying the existing social security mechanisms. A law on Social Security and General Health Insurance was adopted in 2006, providing for a further increase in the retirement age and an extended contribution period for new entrants to the system. The formula for indexation was also changed (Öztürk and Çelik, 2008: 21). Following an appeal by the then President and the opposition party, the Constitutional Court cancelled some of the measures regulating the rights and obligations of civil servants. While the previous reform was the outcome of the project financed by the World Bank, the second was part of the programme imposed by the IMF and the World Bank as a major component of the structural adjustment programme of 2005 designed to reduce the deficit to below 1 percent of gross domestic product (GDP) (Bağımsız Sosyal Bilimciler 2006 Yılı Raporu, 2006: 52–54). Within the process, the social parties were informed, and were involved in both formal and informal meetings, but the measures provoked opposition in parliament and also trade union demonstrations.

In my interviews, informants revealed the contested nature of the process. Officials from Türk-Iş and Hak-İş confirmed that they were involved in the reform process but mentioned the lack of consensus and uncompromising government positions of on some of the core principles. The former head of the SGK stated that,

In 1999 the social parties were involved in the process in a limited sense, and 250,000 people gathered to protest against the government. This was just a polemic and irrational. In the recent reforms we held many meetings but the mentality of trade unions is shaped by pragmatic considerations to get more from the state.

The global financial crisis

The restructuring of public pensions in the two countries remains an open issue. Under the impact of the 2008–2009 global economic crisis, the economies of Greece and Turkey have been subject to successive shocks, and the international financial institutions have exerted damaging pressure on both countries.

The impact on Turkey has been mainly through the slowdown in foreign capital inflows and also a rapid fall in capital outflows, which has increased the fragility of the economy (Boratav, 2010b). There was a rapid decline in manufacturing demand and a dramatic rise in unemployment, from 9.9 percent in 2008 to 14.4 percent in 2010 (Aydın, 2013: 101–103). GDP fell by 13–14 % on this measure, Turkey ranked second to Iceland in its exposure to the crisis (Boratav, 2010a). Despite the severity of the crisis, the government was slow to respond because growth levels had been relatively stable immediately before the onset of the crisis. In the last 6 years, the JDP government has not introduced any significant changes to public pensions, but has reinforced its neoliberal approach to industrial relations. A number of government measures have consolidated a new labour regime which has been called ‘authoritarian flexibilization’ (Çelik, 2015), accelerating the process of deunionization. Legislation in 2009 permitted the establishment of private employment agencies, resulting in a rapid increase in subcontracting and agency work. Similarly, a new law on trade unions and collective agreements in 2012 was shaped by the influence of business organizations, without any genuine negotiations among the social parties (Çelik, 2015: 627).

Parliamentary elections in June 2015 ended the one-party rule of the JDP and resulted in the entry of the left-oriented People’s Democratic Party (HDP) into the parliament. Attempts to establish a coalition government failed, resulting in a cross-party caretaker government pending new elections in November 2015. It remains uncertain whether this could create a favourable political climate for democratic forces and a genuine social dialogue. Any genuine social dialogue seems to depend on the growing political influence of an effective left-wing opposition in both formal and non-institutional politics.

In Greece, the effects of fiscal and sovereign debt crisis have been more long-lasting and dramatic. Successive governments led by PASOK, a technocratic caretaker, conservative ND and the left coalition Syriza have attempted to manage the huge deficit and debt burden, with bailout packages and fiscal consolidation programme imposed by the EU and IMF. Starting from the 2010 bailout package, PASOK imposed increases in value added tax (VAT) rates, wage cuts and a freeze on recruitment in the public sector and restructuring of the pension system. The 2010 Memorandum of Understanding required an increase in the age of retirement from 60 to 65 years, a firm commitment to eliminate early retirement, suspension of pension payments of those who were in employment before the age of 55 years, unification of pension funds by 2018, and a cut in the replacement rate (Monastiriotis, 2013). The agreement with the creditors on the second bailout in 2012 under the conservative-led government included a reduction in the minimum wage, decentralization of the bargaining regime, deregulation of labour laws, rapid privatization of public utilities and further cuts in public sector employment and pensions (Monastiriotis, 2013). Summarizing the social conditions during this period, Roberts (2014) shows how austerity and depression have caused a deterioration in living standards and a dramatic rise in poverty and unemployment (26% in 2012). Roberts (2014) adds that

Greece is burdened with such a heavy level of public (and corporate) debt that Greek taxpayers and small businesses will have to service, that it will keep living standards at ‘third world’ level for a generation … One thing has been achieved by the depression and austerity: lower labour costs. Labour costs per unit of (falling) product have dropped 30% since 2010.

When Syriza won office in February 2015, its campaign promises had been built upon reversing austerity and adopting progressive measures that would stop further losses by labour, restore wages and pensions and increase living standards. Despite winning a referendum called in June 2015 to reject the stringent additional austerity measures demanded by the creditors, the government then capitulated and lost its majority, leading to fresh elections in September. The outcome was that Syriza won almost the same number of seats as before, but was now purged of its left-wing opponents of austerity.

Governments in both Greece and Turkey, to differing degrees, have thus attempted to manage crisis conditions through further austerity. This might further affect the position of trade unions, as adjustments under crisis conditions would require additional attacks on wages and pensions.

Conclusion

In the reform of their pension systems, Greece and Turkey have relied limited degrees on formal social partnership. The creation of social dialogue structures has provided a functional framework in the absence of neo-corporatist institutions. But as I have argued, although existing discussion (which highlights the profound impact of negotiated adjustments within welfare policy reforms) addresses an important issue, the emphasis should lie on whether the actual outcome reflects a genuine consensus and policy exchange with the substantive involvement and contribution of the social parties. In both Turkey and Greece, reform preferences and outcomes were shaped not in a consensual policy process but by the existing institutional structure of the pension schemes and the policy context of reforms shaped by a neoliberal economic paradigm.

It was the EU or the ILO that supported the formation of mechanisms of social partnership as a means of policy exchange among social parties and governments. However, the basis of exchange has been far from a genuine instrument of adjustment: in the absence of binding procedures, these structures have hardly progressed beyond purely consultative bodies. The lack of established institutions does not wholly explain why the process of social dialogue does not work effectively, yet the developmental history of the state-society relationship has led to a partly path-dependent framework for social partnership. This study underlines two factors.

First, the interaction between the state and organized interests of workers and business groups has developed and evolved in a dependent manner under the political, financial control and tutelage of the state. Nevertheless, this does not necessarily imply absolute state autonomy; its relative dominance has been the result of the changing nature of the state-economy and the state-society relationship. In both countries, the state has been the engine of economic development under the process of state-led industrialization, which has had significant repercussions on the institutions of industrial relations; these developed under centralized state control and were subject to strict legal regulation. This can be observed, for instance, in the organization and the conditions of collective bargaining, which was centralized in Greece until the 1990s, and is still subject to tight legal control in Turkey.

The historical development of trade unionism in the two countries displays both weakness and unevenness. Unionization is stronger in the public as against the private sector; while in both countries, unions have developed in an organizationally fragmented manner. There is political factionalism within the Greek GSEE although the confederation has been able to act in a relatively cohesive manner, but the existence of rival confederations in Turkey is far more problematic.

Indeed, the relative organizational unity of the Greek unions and their established political links with political parties as well as higher density and bargaining coverage rates have increased their sphere of influence. Turkish unions lack any such veto power, with tight legal restrictions preventing any connection with political parties. Attempts to block the reform process through industrial action, especially in Greece, can still be read as the political weakness of organized labour, given the limited policy influence within the process of social dialogue (Zambarloukou, 2006: 222–223). Differences in the relative weight of political variables in the two cases do not make a substantial difference within social dialogue process but do influence the outcomes. Sarımehmet Duman (2014) compares Greece and Turkey with respect to their exposure to EU influence ‘as a neoliberal market regime’ in the sphere of social policies and of labour market reforms, and argues that neoliberal measures have been more effectively pursued in Turkey than in Greece because of historical specificities with respect to the nature of class relations and ‘legacies of class struggle’.

Second, since the reforms have been driven mainly by problems in the financial sustainability, the underlying logic of cost-containment and retrenchment reflects a further paradigm change in economic thinking and ideological shift to liberal principles which have had significant redistributive implications (Baccaro and Howell, 2011; Grady, 2013). The process has not only limited the manoeuvre capacity of governments, constrained their responsiveness to social actors, but also undermined the power resources available to social groups.

Developments in both countries reveal the contradictory views adopted by social partners on the one hand, and politicians and government officials on the other. Although all interviewees expressed strong support for a reform process based on consensus and cooperation, the social partners questioned the way that they were integrated in the process and the uncompromising position of the governments. These views were questioned by government officials, who criticized the ‘short-termist’ positions of trade unions especially, and in some cases argued that their involvement delayed the pace of reforms. These differences seem to be related to distinct evaluations of the implications of pension policies, and also to the current policy environment.

Can recently established institutional mechanisms facilitate institutional learning and lead to path-breaking changes in the strategies of policy actors? In addition to the formal mechanisms of dialogue, industrial action by trade unions has provided an alternative method through which to shape the reform process. Current criticism of trade unions for their inability to represent the private and informal sectors should be understood against this background, as in both countries unions face problems in establishing a balance between the aim of representing the interests and rights of all working people, and adjusting to the new socio-economic reality set by economic liberalization. Thus, from a critical perspective, today’s social pacts can also be understood as a process suppressing the ideological dimension of welfare reforms by emphasizing cooperation and consensus, as against struggle and confrontation. The search for a new class compromise through social pacts under less favourable socio-economic circumstances can be seen illusionary, given that these structures have not gone beyond legal formalism and result in further depoliticization and deradicalization of the trade union movement (Wahl, 2004).

Policy change is a dynamic process and subject to the socio-economic and political conditions of specific periods. Thus, analysis of a specific time period constitutes one of the limitations of this study. Each period may be marked by new strategies, perceptions and power resources of policy actors and groups (Jessop, 1999). The prospects for public pension systems in both countries under the tight constraints of financial crises can be examined from this perspective. Various analyses inspired by rational-choice institutionalism attempt to account for the changing strategies and policy influences of societal actors with respect to concepts such as institutional learning or the sacrifice of short-term gains for the long-term interests. However, these approaches attribute an autonomous role to policy actors who are assumed to act rationally under the restraints of existing macro-economic or political conditions; this can be questioned in accounting for the actual power struggles within societies as well as other policy processes at global level. Although some authors hold that negotiated reforms have been a voice for organized labour, this seems to reflect the other dimension of the prevailing orthodoxy that subordinates the social dimension to the requirement of economic imperatives. The result, as Jayasuriya (2005) argues, is a tendency to neglect how policy processes and capacities reflect changes in the constellation of social and economic interests.

Footnotes

Acknowledgements

I would like to thank Richard Hyman and the two anonymous referees for their valuable and constructive comments and suggestions.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Author biography

Aslı Güleç Taşdemir is an Assistant Professor in the Department of Labour Economics and Industrial Relations at Kocaeli University, Turkey.

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