Greece: Reducing the number of public servants – latest developments

The number of public servants in Greece fell by 18% between 2009 and 2015 to just under 567,000, a condition of the country’s loan agreements which required cuts to the public sector to reduce fiscal expenditure and increase the competitiveness of the economy. However, trade unions have protested against the cuts while employers say the public sector is still too large.

Memorandum commitment to reduce public expenditure

The size of the public sector and its efficiency has long been a subject of political debate in Greece. Until recently, the public sector was relatively protected, but public opinion has been critical of its size and efficiency. During the period of economic crisis, as a condition of the memoranda signed with the International Monetary Fund (IMF), European Union (EU) and European Central Bank (ECB), the Greek government enacted a series of measures, without consultation with social partners, to reduce the number of public servants and the level of public spending as a proportion of GDP.

The most important legislative interventions to reduce the public sector wage bill and operational expenditure in recent years are as follows.

Law 3833/2010:

• reduced public sector salaries (in various forms);
• suspended public sector recruitment and appointments for 2010 (with the exception of education, health and security);
• established the principle of a 1:5 ratio of recruitment to departures in the public sector (with the exception of education, health and security);
• introduced a 30% reduction in recruitment for indefinite-term, fixed-term and project contracts in the public sector for 2010.

Law 3899/2010:

• extended zero increase in wages throughout the public sector for 2011 (and beyond) and reduced salaries;
• removed all exceptions to the 1:5 ratio of recruitment to departures in the public sector;
• introduced an additional 15% reduction on recruitment for fixed-term and project contracts in the public sector for the year 2011 (as  compared to 2010).

Law 3979/2011:

• increased the working week in the public sector from 37.5 hours to 40 hours.

Law 3986/2011:

• introduced the labour reserve system in the public sector, paying 60% of basic salary to those assigned to the 'reserve' with the aim of reducing the cost of overstaffing;
• introduced voluntary redundancies for those in the labour reserve system;
• established a 1:10 ratio of public sector recruitment to departures for 2011; 
• extended the removal of all exceptions to the 1:5 ratio of public sector recruitment to departures to 2015.

Law 4052/12:

• suspended local government recruitment until 2016.

Law 4172/13:

• applied staff mobility throughout the public sector.

Changes in public sector employment and recruitment, 2009–2015

The latest data from the Human Resources Register of the Ministry of the Interior and Administrative Reconstruction show that there was an 18% reduction in the number of permanent public servants between 31 December 2009 (692,907) and 31 December 2015 (566,913). The loss of 125,994 employees is broken down per year in Table 1, with the ratio of recruitment:departures for 2013–2015 shown in Table 2.

Table 1: Change in regular workforce in the public sector, 2009–2015

Note: Figures reflect the situation on 31 December in each year

Table 2: Departures and recruitment in the public sector, 2012–2015

Note: There is no figure for departures for 2012; the government’s Human Resources Register, from which these data are extracted, started 1 January 2013.

Changes in spending on public sector wages, 2009–2015

According to data from the State General Accounting Office:

• Overall government wage expenditure (including imputed social contributions) decreased by 31% from €31,013 billion in 2009 to €21,447 billion in 2015.
• As a percentage of GDP, overall wage expenditure decreased from 13.1% in 2009 to 12.2% in 2015. GDP fell by 26% in this period which is why the fall in expenditure is far greater than the fall as a proportion of GDP.
• Imputed social contributions increased by 8% from €5,194 billion in 2009 to €5,615 billion in 2015.
• As a percentage of GDP, imputed social contributions increased from 2.2% in 2009 to 3.2% in 2015.
• The net expenditure on wages (excluding imputed social contributions) decreased by 39% from €25,819 billion in 2009 to €15,832 billion in 2015.
• As a percentage of GDP, net expenditure fell from 10.9% in 2009 to 9% in 2015. This rate is less than the European average, which is 9.2% of GDP.

This information is included in The truth for the Greek Public Sector (PDF) published by the Ministry of Interior in June 2016 and distributed through the press.

The impact of the reduction of public servants in health and education

The changes made in the public sector (described above) have failed to increase GDP or improve competitiveness. Instead, they have created serious shortages of staff and undermined the quality of basic social services such as health, education, justice and public security.

Several organisations have highlighted staff shortages in the health sector. The Greek Medical Association (PIS) claimed in February 2016 that the National Health System (ESY) needs an additional 6,000 doctors to operate effectively. The Panhellenic Federation of Workers in Public Hospitals (Poedin) reported in October 2015 that there were 26,347 vacant positions in hospitals (as reorganised under the memoranda policies). In addition, there were 3.6 nurses per 1,000 capita, compared with the EU average of 8 nurses per 1,000. One example is the shortage of beds in intensive care units due to a lack of staff. Understaffing results in an excessive burden on hospital employees and insufficient support for patients and is one of the key issues frequently raised during demonstrations by staff in the health sector. Recognising the magnitude of the problem, and on the basis of a report recording staff shortages in hospitals (which established that there are about 4,000 vacant doctors posts), in March 2016 the Health Minister demanded the immediate and urgent recruitment of 800 permanent and 700 auxiliary doctors and 2,500 nurses, a process which is ongoing.

There are similar problems in the education sector; the Minister of Education recently admitted at a parliamentary meeting that there is a shortage of 1,164 teacher in junior and senior high schools. The Teachers Federation of Greece (DOE) and the Greek Federation of State School Teachers of Secondary Education (OLME) state that the number of teachers has decreased by 33.92% since 2009. In 2009, 185,917 teachers were employed, compared with 134,413 today. In response to the problem, the Minister of Education announced plans to recruit 20,000 teachers by 2018. However, objections from the IMF, EU, ECB and the ESM (European Stability Mechanism) led to the suspension and review of this measure from July 2016. The teachers’ unions have expressed concern that there will be no permanent appointments in the new school year and that the situation will remain as it is. 

Debate between employers and government

Despite the cuts in public sector spending and employees, in May 2016 the Hellenic Federation of Enterprises (SEV) described ‘a bloated public sector compared with an exhausted private economy’. According to SEV, the overall number of public sector employees is actually 770,000. SEV’s main criticisms are:

• In 2015, spending on public sector wages and imputed social contributions as a proportion of GDP (12.2%) was higher than the EU average (10.2%).
• Overtaxation to cover the salary and operational costs of the public sector places a high burden on the economy and society.
• There is a need to upgrade the operation of state services with more transparency, accountability and evaluation. These improvements will ensure non-wage labour competitiveness and improve efficiency in order to meet the needs of the private sector.
• There was less financial burden on employees of the public sector than on private sector employees during the crisis period (2010–2015). The average salary fell by 14.6% in the public sector and by 17.9% in the private sector, with staffing levels falling by 24% in the public sector and 20.9% in the private sector. These figures are based on the Elstat Labour Force Survey 2015 (PDF).

The employers’ claims opened a period of confrontation with the government, which openly rejected SEV’s arguments. According to the government, the overall public sector wage bill has fallen significantly during the crisis, due to both the decrease in the number of public sector employees and the wage cuts. More specifically, the decrease in the average public sector salary was more than 14.6% for the period 2009–2013. For example, wages in this period fell by 38.3% for employees in the Ministry of Finance, by 35% for doctors in public hospitals, by 25% for teaching staff and by 21.7% for police officers.

After intense dialogue between the government and SEV, the Ministry of Interior and Administrative Reconstruction ended the confrontation in May 2016 by highlighting the following points of possible consensus:

• the overall public sector wage bill has fallen significantly during the crisis;
• a need for institutional improvement of the public sector by improving efficiency and providing quality services such as a single unified wage system, an evaluation system, a register for selecting higher executives, an increase in voluntary mobility for employees, and the removal of political party influences;
• a need for constructive cooperation between the public and private sector so that the public sector can be maintained by broadening the tax base instead of overtaxing wage earners and pensioners. Meanwhile the private sector can grow with the help of reforms to simplify the regulatory environment, to improve the efficiency and quality of public sector dealings with individuals and to make the welfare system fairer and more reciprocal.

Commentary

Despite the significant reduction in the number of civil servants and their wages, the economic recession and high unemployment are still present and the competitiveness of the economy has not improved. According to government and the unions, further layoffs and spending reductions are expected overburden the economy and worsen the recession. Apart from the necessary measures to improve the efficiency of public administration, public debate in Greece has focused on the need to put an end to austerity policies and to develop real growth policies in order to increase employment with stable jobs and decent wages in both the private and public sectors.