Unions react strongly to announced Ionian Bank sell-off

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The Greek Government's announcement in May 1998 that it intends to sell Ionian Bank as a first step in a process of privatisations has brought to a head a confrontation between the Government and the trade union movement as a whole, and the bank employees' unions in particular.

On 6 May 1998, the Minister of National Economy and Finance announced the Government's decision to go ahead with the immediate sell-off of Ionian Bank through an international bidding process on the Athens Stock Exchange, for which Commercial Bank will set the conditions. The government says that its decision to sell Greece's oldest bank (founded in Corfu in 1839) is aimed at strengthening it and thus enabling it to survive in the tough competitive environment of the single European currency market. An alternative proposal, to merge Ionian with Commercial Bank, was analysed by MONITOR Co on government instructions and initially chosen as a correct and advantageous solution, but was later rejected by the Government. The basic arguments for this rejection were that it would entail too high a cost and have serious social consequences, including 3,100 redundancies and the closure of 153 branches. In an effort to allay workers' opposition, the Minister of National Economy stressed that "one basic condition of the contract of sale will be that the buyer will refrain from making job cuts for a certain period of time."

Union reactions

Ionian Bank employees have responded decisively to the announced privatisation of the bank with strike action which was still continuing in late May. The confrontation between the Government and employees of Ionian Bank is expected to grow and spread throughout the public banking sector, as both the Ionian Bank Employees Union and the Greek Federation of Bank Employees Unions (OTOE) are planning increased action aimed ultimately at preventing the sale of the Bank. Specifically, Ionian employees staged a 24-hour strike on 8 May and planned two more 24-hour strikes on 14 and 15 May. On 8 May, a delegation from the OTOE and the Commercial and Ionian Bank Employees' Unions met with the Speaker of Parliament to denounce what they claimed was an unjustifiable attack on Ionian employees by special police units on 7 May, the first day of action, as well as the sale of the Bank, which in their view is unjustifiable from an entrepreneurial viewpoint.

The OTOE general council called a 24-hour nationwide strike in all banks for 11 May. A new meeting of the OTOE council was set for 12 May for the purpose of organising a new programme of action, which will probably include rotating strikes in all public sector banks. The chair of the Ionian Bank's union called the Government's decision "one-sided and criminal" and stated that the workers were ready to begin a strike of unlimited duration.

A letter sent by the OTOE to the Greek Parliament requesting MPs to intervene to prevent the sale of Ionian Bank includes details of the relevant positions of the trade unions in the banking sector. The OTOE points out that various types of mergers, mainly on the national level, are being put forward as a necessary prerequisite for increasing banks' viability and competitiveness in view of Economic and Monetary Union (EMU) and the euro single currency, and that the Greek banking system cannot be an exception to the trend towards creating large groups of banks with a strong capital base. Still, doubt is cast on the strategy pursued by the Government, as well as on its choice of privatisation as a solution. More specifically, in its letter the OTOE sets out a series of questions directed at the Government. Chief among them are the following:

• What will be he benefits for consumers as a whole, the gains for shareholders and the advantages for the national economy?

• What is the rationale for selling Ionian Bank rather than creating a strong public banking group?

• What are the arguments overruling the conclusions of the MONITOR Co study which favours merger with Commercial Bank as a solution?

• How will a weakened Commercial Bank, at present the main shareholder in Ionian Bank, manage to survive on its own?

• Why should there be only two groups of state-controlled banks, that of National Bank and that of Agricultural Bank?

• What will happen to the insurance funds which hold the majority of the shares in Commercial Bank?

• How can the sale of Ionian Bank be expected to increase the competitiveness of the banking system, when it is commonly known that there is no oligopolistic cooperation among the so-called state banks, but rather very intense competition?

In this framework, the OTOE rejects the sell-off solution, and proposes:

• creation of a strong Commercial-Ionian Bank group with a single administration and highly-skilled managers, to be hired through an international competition for a period of at least five years;

• recovery within three years, without state intervention, based on the present situation in the private sector;

• ridding the group's portfolio of all non-financial institutions; and

• fostering the dynamic which unification will create, so as to strengthen the capital base of the Commercial-Ionian Bank group.

The OTOE believes that its proposed solution will adapt the Greek banking system to international trends and ensure the stability that will enable the Greek economy to be included in the euro zone in 2001. It will also ensure employment and ward off social conflict. Any loss of jobs that may become necessary through implementation of the rationalisation plan can be dealt with through the natural flow of retirements, and obligatory retirement after 35 years of service. In contrast, the OTOE maintains that the Government's proposed privatisation solution will be accompanied by mass redundancies, as has happened in every other similar case worldwide, any commitments on this issue notwithstanding.

Commentary

Following the devaluation of the drachma (GR9803161F) and Greece's inclusion in the EU Exchange Rate Mechanism, the Government has begun to implement a programme of structural adaptation to the framework of the European Union. After failing to introduce all planned changes in Olympic Airways (GR9804166F), the Government obviously wants to show in its announcement on the sale of Ionian Bank its determination to move in the direction of the announced structural changes aimed at Greece's inclusion in EMU in 2001 (GR9802155F). Union opposition to the sought-for changes is strong. As the Government intends to bring the changes about within a period of only 18 months, it seems very probable that conflicts with the unions will be sharp and their outcome uncertain. (Evangelia Soumeli, INE/GSEE)