Extraordinary measures used to activate European economic support mechanism

As a result of the crisis in the Greek economy and in order to secure the eurozone’s financial and budgetary stability, a European support mechanism has been created to finance the Greek debt. For the activation of the support mechanism, a law foreseeing a wide range of measures has been introduced, seeking to reduce public expenditure immediately and to create a favourable investment environment. However, trade unions have reacted strongly against the measures.

The effects of the global economic recession on the Greek economy reached a crisis point in early 2010, when the country was found to be on the brink of bankruptcy. In order to secure the eurozone’s financial and budgetary stability, the heads of state and government of the eurozone announced their decision to create a support mechanism for the Greek economy with a Declaration dated 25 March 2010. The support mechanism provides for the granting of financial aid amounting to €110 billion: €80 billion in the form of bilateral loans from Member States of the European Union and €30 billion from the International Monetary Fund (IMF). The first €30 billion will be deposited in 2010. For the implementation and activation of the support mechanism, the Greek authorities, the European Commission, the European Central Bank (ECB) and the IMF drew up a ‘Memorandum of understanding’, setting out the targets and the framework of the economic, budgetary and financial policy until December 2011.

Objectives of support mechanism

The ultimate goal of the adopted measures is to reduce the budgetary deficit by 11 percentage points by the end of 2013 – that is, from 13.6% of gross domestic product (GDP) in 2009 to under 3% of GDP by 2014. In this context, the Law on the implementation of the support mechanism of the Greek economy by the eurozone countries and the IMF, approved by the Greek Parliament (Ελληνικό Κοινοβούλιο) on 6 May 2010, introduces a series of measures for the immediate reduction of public expenditure and the creation of a favourable investment environment. The measures will not only have a direct impact on the incomes of employees and pensioners, but are also expected to alter fundamental elements of the Greek labour market system.

Main measures

Individual employment relationships

The law introduces so-called ‘stage agreements’ for hiring unemployed persons up to 24 years of age, who are registered in the Labour Force Employment Organisation (Οργανισμός Απασχόλησης Εργατικού Δυναμικού, OAED) lists, for a period of up to 12 months. During the term of this agreement, the gross earnings will correspond to 80% of the unskilled worker’s minimum wage, as stipulated by the National General Collective Agreement (Εθνική Γενική Συλλογική Σύμβαση Εργασίας, GSEE) that is in force at the time. The social security contributions shall be paid by OAED.

At the same time, the law envisages the possibility to transform – with the consensus of the unemployed person – the unemployment benefit into a ‘cheque for reintegration into the labour market’. The cheque is received as a subsidy by the employer who hires an unemployed person registered in the OAED lists. After the end of the subsidy and if the employment relationship continues, the enterprise is entitled, for a certain period of time, to a subsidisation of part of the social security contributions.

In addition, the prohibition on placing employees in the public sector through temporary employment agencies is lifted for three years, while provision is made for OAED to subsidise temporary employment agencies in hiring unemployed persons aged 55–64 years to work in the public sector. The age restriction does not apply for the placement of employees through temporary employment agencies to organisations supervised by the Ministry of Health and Social Solidarity (Υπουργείο Υγείας και Κοινωνικής Αλληλεγγύης) – such as welfare institutions, mental health structures and centres for prevention.

Moreover, the limit of legitimate redundancies in the event of collective redundancies will be raised by presidential decree. At the same time, redundancy compensation will be reduced by presidential decree.

Collective employment relationships

The principle of the ‘implementation of more favourable provision’ (Günstigkeitsprinzip) is to be abolished. According to this principle, the terms of company agreements apply only when they are more favourable than the terms of sectoral agreements, which, in turn, apply only when they are more favourable than the terms of the GSEE.

Meanwhile, the mediation and arbitration procedure in the case of collective labour disputes (GR0911019I) will be altered by presidential decree.

Wages and pension cuts

The earnings, severance pay, allowances and all kinds of remuneration of public servants and of personnel employed under a private-law employment relationship – that is, in the state, in public law corporate bodies and local government organisations, in the armed forces, in the Hellenic police, the fire brigade and the coast guard – are to be reduced by 8%. This is in addition to the reduction provided for by Law 3833/2010 (GR1003029I).

The earnings, severance pay, allowances and all kinds of remuneration of personnel employed by private-law corporate bodies that are owned by the state, or which are regularly subsidised by the national budget, or are public enterprises, are to be reduced by 3%. This is in addition to the reduction provided for by Law 3833/2010.

In terms of bonuses, the Christmas, Easter and holiday bonuses of all of the above employees – which amount to two monthly salaries and are referred to as the 13th and 14th month salary – are to be readjusted as follows:

• the Christmas bonus will now amount to €500;

• the Easter bonus will total €250;

• the holiday bonus will be amended to €250.

These bonuses are to be paid only as long as the ordinary earnings, allowances and remuneration of any kind do not exceed the monthly amount of €3,000.

The Christmas, Easter and holiday bonuses provided for by any general or special statutory provisions or regulatory acts for pensioners and allowance beneficiaries of the wider public sector are to be paid as long as the beneficiary is older than 60 years of age and the overall pension amount paid each month does not exceed €2,500. The bonuses are to be readjusted as follows:

• the Christmas bonus will now total €400;

• the Easter bonus will amount to €200;

• the holiday bonus will be amended to €200.

Tax increase

The ordinary value added tax (VAT) rate is being increased from 21% to 23% and the reduced rate from 10% to 11%.

Moreover, the excise tax charged on cigarettes, spirits and energy products is being increased and a flat-rate tax is being imposed on diesel fuel used for heating oil.

Trade union reaction

The Greek General Confederation of Labour (Γενική Συνομοσπονδία Εργατών Ελλάδας, GSEE) and the Confederation of Civil Servants (Ανώτατη Διοίκηση Ενώσεων Δημοσίων Υπαλλήλων, ADEDY) called 24-hour nationwide general strikes of workers in the public and private sectors on 24 February, 11 March, 5 May and 20 May 2010. Moreover, a three-hour work stoppage was held on 5 March, while protest rallies took place on 6 and 12 May. The strikes were attended by a huge number of workers and are considered to be the biggest since the fall of the dictatorship in 1974 – in the era called ‘metapolitefsi’ (μεταπολίτευση).

At the strike of 24 February, representatives of the European Trade Union Confederation (ETUC), UNI-Europa and the European Federation of Public Service Unions (EPSU) were present and sent messages of sympathy and solidarity. Furthermore, at the strike held on 5 May, representatives of ETUC, the European Metalworkers’ Federation (EMF), the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB), and France’s General Confederation of Labour (Confédération générale du travail, CGT), Force ouvrière and the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT) were present and also sent messages of sympathy and solidarity. According to the resolutions of the strike rallies, trade unions are demanding that ‘the haves be the ones to pay for the crisis, not the workers and society’.

Sofia Lampousaki, Labour Institute of Greek General Confederation of Labour (INE/GSEE)