Joint letter rejects private sector salary threshold cut

Following the government’s invitation in January 2012, the main employer and employee associations joined discussions related to improving Greek competitiveness by reducing wage costs. As a result of the debate, they drafted a joint letter on 3 March 2012, opposing any exceptions and derogations from the National General Collective Employment Agreement (EGSSE), which lays out the salary and hours thresholds for the entire private sector in Greece.

Background

With the arrival of the Troika (the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission (EC)) representatives, whose aim was to set up a financial adjustment programme for the period 2012 to 2015, the Greek government asked the main social partners to look at wage cost issues in the private sector in January 2012. The social partners were the Greek General Confederation of Labour (GSEE), the Hellenic Federation of Enterprises (SEV), the General Confederation of Greek Small Businesses and Trades (GSEVEE) and the National Confederation of Greek Traders (ΕSΕΕ). The main argument for the requested reduction of salaries was to strengthen the competitiveness of the economy and to increase employment. According to Eurostat, unemployment was at 19.2% in October 2011. As a result the social partners drafted a Joint Letter, to the Prime Minister and the leaders of parliamentary parties, to express their opposition to the reduction of wages, suggesting tax wedge issues and structural competitiveness should be examined instead.

Government invitation to agree private sector wage cuts

The first meeting with the social partners (GSΕΕ, SEV, GSΕVΕΕ, ΕSΕΕ) was held on 4 January 2012 and the Prime Minister at the time, Lucas Papademos, posed a number of issues for discussion. He stated:

The year 2012 signals the most crucial period for the progress of the Greek economy. In mid-January 2012, the negotiations of the Greek government with the Troika begin, which will focus on the drafting of a financial adjustment programme for the period 2012 to 2015. The lack of competitiveness is the fundamental reason for the fall of the Greek economy and the rise of unemployment. International organisations and the European partners have set a number of issues for re-examination within the framework of the social dialogue, in order to improve competitiveness and boost employment.

Mr Papademos later invited the social partners to reach an agreement on the improvement of the economy’s competitiveness and the strengthening of employment by the end of January 2012. He also pointed out that the agreement will be taken into consideration when the economy’s performance is assessed, which will affect the country’s funding. He asked the partners ‘to show a spirit of understanding and cooperation during the social dialogue that is now opening’ in order to reach ‘a great social agreement lying on the axes of competitiveness and employment’.

Issues for discussion

The social partners were given a very particular framework for bargaining and, in particular, they were asked to discuss the following issues:

• reduction of the salary threshold planned by the National General Collective Agreement (EGSEE);

• freezing of any increases in 2012 (based on the euro-inflation of 2011) planned by the ΕGSSΕ for July 2012;

• freezing of wage drifts due to multi-annual experience;

• reduction or abolition of the 13th and 14th salary (that is holiday, Easter and Christmas bonuses);

• abolition or amendment of the employment regulations of the DEKOs (public utilities);

• abolition or reform of the principle of continuing the collective employment agreements (in other words the preservation of the effect of the agreement’s regulations for a period of six months after its date of expiration, if no new collective employment agreement is signed).

Joint letter of the social partners

After a number of meetings throughout January, the employee (GSΕΕ) and employer (SEV, GSΕVΕΕ, ΕSΕΕ) associations drafted a joint letter dated 3 February 2012, which they addressed to the Prime Minister and to the leaders of the parties in parliament. In this letter the social partners point out, among other things, the following:

• salaries in the economy’s private sector were reduced in 2010 and 2011 by 14.3%;

• Greece has been going through unprecedented conditions of recession in the past four years;

• competitiveness is affected much more by factors such as bureaucracy, state intervention and its taxation system rather than by wage costs;

• the reduction of salaries affects the resources of the insurance funds;

• deducting more resources from demand pushes the economy and social cohesion towards recession;

• there is an increasing pressure on undertakings that affects their sustainability. This is due to urgent taxation charges, the increase in the cost of raw materials and energy and the lack of liquidity.

Agreement by social partners

Given the aforementioned statements, the employee and employer associations agreed on a number of points.

• The ΕGSSΕ’s provisions on salary thresholds and on the 13th and 14th salary should remain as they are.

• A trilateral dialogue should begin on the tax wedge and structural competitiveness, and its conclusions should be legally established. This dialogue should include reducing social insurance contributions and finding an equivalent acceptable to the social partners. It should also include seeking solutions to basic issues of competitiveness such as a simple and stable taxation system, the simplification of procedures for the licensing and operation of firms and the use of land. Sound rules and conditions for competition should also be reviewed.

• Preserving the framework of collective agreements remains a substantial issue in collective autonomy and bargaining.

The workers’ side (GSΕΕ) did not accept the employer association proposal to abandon any increase in private sector salaries in 2012 and 2013.

Commentary

Although there was no agreement between the social partners, there will be a direct reduction of private sector wage costs through reducing salary thresholds of the National General Collective Employment Agreement (EGSSE) and other relevant regulations. Wage costs will also be reduced through the radical reform of the salary threshold bargaining system in the private sector. This was introduced under an Act adopted by the Greek Parliament on 12 February 2012, despite protest demonstrations in Athens and regional cities. The direct reduction of private sector salaries has caused significant anxiety in Greece, given the failure of social benefits to make up for lost incomes. At the same time, the trade unions are bringing forward a number of issues related to the compatibility of the relevant regulations with the Constitution and with international employment agreements.

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