Greece 2010–2012

For the past three years, Greece has been at the epicentre of a global and European crisis. This started as a financial crisis, turned into a sovereign debt crisis followed by a crisis in the real economy ¹ and nowadays manifests itself as a deep social crisis with major impacts on the labour market. In May 2010, while the euro area refrained from addressing the private debt crisis –which along with the sovereign debt crisis form the two components of the economic crisis – the Greek government announced the country’s accession to an EU-International Monetary Fund (IMF) support mechanism in order to tackle the high deficit and the growing public debt. As a condition of receiving the EU-IMF loans, Greece was expected to follow a specific path to austerity, concentrating mainly on public spending cuts, the assumption being that such a move would reduce the debt in the longer run. The terms of the First Memorandum of Understanding (MoU) agreed with the troika of the European Commission, the European Central Bank (ECB) and the IMF demanded a package of emergency measures, introducing pay cuts for all public servants, imposing restrictions on pension rights and promoting lay-offs both in the public and the private sector. The wide range of austerity measures instead of reducing the high deficit, constrained economic activity even further, leading the country’s economy into a deeper recession.

Despite the failure of the first austerity package, the Greek government announced at the end of 2010 new, tougher, austerity measures, new taxes and a higher rate of VAT, in its 2011 budget. In a never ending circle, the austerity worsened the country’s debt. By the summer of 2011 it became clear that debt restructuring was unavoidable. ² After the Greek Private Sector Involvement (PSI) was announced in July 2011 and without any national elections being held, a new coalition government came to power, which committed to carrying out the terms of the new bailout-PSI combination package. However, the deep haircut carried out in October 2011 was accompanied by a new loan and a new agreement on another austerity plan. The new package of austerity measures signed between the Greek government and troika in February 2012, widely known as the ‘2nd Memorandum’, found Greece’s workforce bearing the cost of the ‘voluntary default’, Greece facing a shrinking economy and a still unsustainable debt, and Europe facing the extension of the crisis into the indefinite future.

Both MoUs ³ signed between the Greek government and the troika contain a complex set of internal policy provisions relating to fiscal consolidation that focus on both the public and private sectors. The MoUs also address ‘structural reforms’, many of which are aimed at a restructuring of the labour market. The MoUs are premised on the belief that the chronic ‘competitiveness deficit’ of the Greek economy can be dealt with through ‘internal devaluation’; through a reduction in labour costs to be achieved, not only by wage cuts, but also by imposing general restrictions on labour rights. In order to achieve the required internal devaluation, the MoUs prescribe in a strikingly detailed manner a number of legislative reforms. Therefore, the laws that have been enacted in line with the demands of the MoUs are all based on the assumption that, as existing labour legislation constituted the principal obstacle to the competitiveness of the Greek economy, the basic protective labour regulation architecture should be dismantled. Consequently, the implementation of the MoUs has resulted in far-reaching reforms in the labour market, which are neither temporary nor partial.

Despite the crisis, in 2010, the social partners were able to conclude a new National General Collective Agreement (NGCA) which set the obligatory minimum wages to be applied until the end of 2012. In addition, in February 2012, the social partners reaffirmed their will to respect the NGCA 2010–2012. However, the implementation of the terms of the 2nd MoU completely set aside both the preceding national social dialogue and the binding agreement of the social partners. The 2nd MoU requires, first, that the minimum wages established by the NGCA are to be reduced by 22 per cent compared to the level of 1 January 2012, while for young workers (those aged below 25), the wages established by the NGCA are to be reduced by 32 per cent. Secondly, clauses in the law and/or in collective agreements (CAs) that provide for automatic wage increases, including those based on seniority, are to be suspended until the unemployment rate falls below 10 per cent. ⁴

Apart from the measures concerning direct wage cuts, the reforms demanded of Greek labour law by the MoUs promote structural reforms, which dismantle core elements of the Greek industrial relations system, intended primarily for the protection of workers. Thus, according to the demands of the 1st MoU, the favourability principle, formerly a fundamental organizing principle of the Greek labour law system, has been abolished. Henceforth, enterprise-level CAs prevail (in all cases) over sectoral CAs, even where the clauses contained in the former are less favourable to the employee than those contained in the latter. Moreover, according to the provisions of the 2nd MoU, an overhaul of the NGCA is to be planned, aiming at replacing the wage rates set in the NGCA with a statutory minimum wage set by the government, in consultation with social partners. As far as arbitration is concerned, the demands of the MoUs curtail significantly its role in labour market regulation, thus setting aside a major component of the collective bargaining mechanism outlined in the Greek Constitution (Article 22(2)).

All in all the demands of the MoUs are directed towards reducing the influence of trade unions on labour market regulation and reducing the scope for collectively bargained employment standards, in favour of legally binding minima. Allied to all this is clear evidence that the labour law policies currently being applied seem to be promoting a transition from collective to individual bargaining. Since the beginning of 2011, more and more Greek enterprises have concluded individual contracts of employment ⁵ , which provide for lower wages and inferior conditions of employment than those contained in the previously applicable CAs. Needless to say, individual bargaining, in the context of an economic recession, equates to a severe infringement of the right to negotiate, since in most such cases the terms of employment are simply imposed by the employer.

Already in July 2010, the Greek General Confederation of Labour (GSEE) transmitted to the ILO Committee of Experts comments on the impact of the measures taken within the framework of the First MoU on the application of a number of ratified Conventions. In September 2011, a High Level ILO Mission visited the country in order to gain a comprehensive understanding of the issues. In its report, among others, it recalled that, “if, as part of its stabilization policy, a government considers that wage rates cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional measure and only to the extent that it is necessary, without exceeding a reasonable period, and it should be accompanied by adequate safeguards to protect workers’ living standards”. The High Level Mission also stressed that the changes introduced to the industrial relations system in Greece were likely to have a spillover effect on collective bargaining as a whole, to the detriment of social peace and society at large. ⁶

On 17 June 2012, Greeks went to the polls for the second time in two months, after all attempts to form a new government failed, following the general election held on 6 May. The second election results led to the formation of a new, three-party coalition government, including New Democracy (placed first in the elections), PASOK (placed third) and the smaller Democratic Left. The new government has once more committed to carrying out the terms of the bailout deals, seeking, though, a two-year extension of the country’s latest austerity programme.

In October 2012, the Greek government reached an agreement with the troika on a revised plan, totalling €18.5bn in savings over four years. Facing a sixth straight year of recession, the new austerity package provides for 27 000 public servants to be suspended by the end of 2013, new pay cuts for public servants, further cuts to already depleted pensions, further welfare benefit cuts and a further deregulation of dismissal law. Both GSEE and the civil servants’ union federation (ADEDY) have very strongly opposed the above austerity measures, organizing general strikes and demonstrations to protest against them. It is however doubtful how much pressure these strikes and protests can exert on a government which has repeatedly committed in public to implementing all agreements with the troika. Indeed, on 7 November 2012 the Greek parliament passed the austerity plan with tiny majority, since the coalition was shaken by the large number of defections. However, the loan tranche is not to be released until the end of November 2012, waiting for the troika’s report on the state of the nation’s finances and its efforts in keeping to agreements reached in two previous bailouts

Eftychia Achtsioglou Doctoral student in labour law, Aristotle University of Thessaloniki, Greece Email: eachtsio@law.auth.gr