The third Memorandum of Understanding for Greece came into force from January 2016, which sets out measures that the government will have to implement before the end of 2018. These include tax policy reform, a more sustainable pension system, and improved management of health sector finances.
To address the severe crisis faced by the Greek economy since 2010, the European Stability Mechanism (ESM) was set up to provide loans to Greece in order to help put the country's economy back on a sound footing and return to growth. The government must, in turn, make necessary structural changes and introduce measures to improve the management of public finances as set out in the memoranda of understanding that correspond to the loan agreements. The implementation of the reform measures is linked to the corresponding facility agreements, with representatives of the Troika (the International Monetary Fund, the European Commission and the European Central Bank) travelling to Athens every three months to examine progress of the memorandum’s implementation. If progress is satisfactory, the next tranche of the loan from the ESM is released.
The Memorandum of Understanding of 11 August 2015, under which the corresponding Financial Assistance Facility Agreement of 19 August 2015 between the ESM and Greece is executed, is the third memorandum to have been entered into with Greece since 2010. The previous two memoranda were those of 3 May 2010, which accompanied the loan facility agreement of 8 May 2010, and 9 February 2012, which accompanied the second financial assistance programme.
Some of the policies implemented under the first and second memoranda aimed to reduce the cost of the public sector. They included:
According to data published by the Hellenic Statistical Authority (ELSTAT), salaries in the private sector fell by 28.16% between 2010 and the first quarter of 2015. At the same time, successive reductions have been imposed both on lump-sum payments and on pensions (main and supplementary) for all public sector pensioners.
The third memorandum was incorporated into Greek law with Law 4336/2015 on 14 August 2015, which sets out the terms of the financial assistance facility for 2015–2018. The law imposes a wide range of measures and policies that the government will have to implement during this period, including reforms to tax policy, measures to improve management of public finances, increased transparency in public contracts, a more sustainable pension system, and improved management of health sector finances. A package of measures for the modernisation of the state and public administration which occupies a central role in the programme is set out in Section 5 of the third memorandum.
The main strategy for the public sector is the:
The measures laid down in the third memorandum concern:
The Greek government must (as set out by the memorandum) take action and analyse the following measures.
The alignment of non-wage benefits: Such as daily and travel allowances, to be aligned with EU best practices.
A unified public sector wage grid should be introduced: A key pillar being the determination of wage levels in connection with the skills, performance, responsibility and position of staff. The existing wage system is sector-based, with the result that salaries for similar jobs and the same qualifications differ between ministries. The objective of the unified wage grid is to make the system of remuneration occupation-based, with salaries determined on the basis of criteria such as qualifications, years of service and duties.
The legislation on the selection of managers should be reviewed: The aim being to de-politicise public administration and to strengthen public sector meritocracy. The reform will base the recruitment of managers on merit and competence, severing placement in public sector managerial posts from political decisions.
A legislative framework should be introduced: To evaluate the performance of all public sector staff to foster a results-oriented culture.
The ‘attrition rule’ should be continued in 2016. This purpose of this rule, introduced during the implementation of the first and second memoranda, is to reduce staffing levels in the public sector.
A new permanent mobility scheme: To promote the use of job descriptions linked to an online database that will include all current vacancies. This should rationalise the allocation of resources and staffing across the general government.
The identification of illegal hirers: This should continue as well as the work of handling disciplinary cases.
To implement the above policies, the Greek Parliament passed Law 4369/2016, The National register of public administration managers, job grading structure, systems of evaluation, promotion and selection of departmental heads (transparency/meritocracy and effectiveness of public administration) and other provisions. According to the law’s explanatory memorandum, the main objectives are to tackle the problem of politicisation of the public administration and bureaucracy, and to introduce modern staffing policies in order to restore shaken confidence in public institutions.
Law 4354/2015 was also passed; The management of non-performing loans, wage settlements and other urgent provisions for the implementation of the agreement on fiscal targets and structural reforms. In Section B, it sets out pay arrangements for public sector employees of first and second-tier local government organisations, legal entities of public and private law, and public utilities. According to the law’s explanatory memorandum, the new pay system is based on the principles of:
In statements on the provisions of the third memorandum and the laws implementing it, the Supreme Administration of Greek Civil Servants Trade Unions (ADEDY), which is the third-tier national body representing employees in the public administration, identifies the problems of the public sector as being underfunding and understaffing. It argues that this is due to the implementation of the memorandum policies of austerity, and emphasises that as long as austerity and the policy of limiting recruitment continues, no policy to put the public sector will be implemented and operate effectively.
In protest to the Greek government, ADEDY states that since the country entered the ESM, public sector salaries have fallen by about 40% on average and it complains of the ‘family silver’ being sold off to private individuals. Thousands of employees are losing their jobs and crucial sectors (such as hospitals and schools) are not functioning properly. Apart from these general political statements, ADEDY believes that the system for selecting departmental heads in public administration has not improved, as they must still be interviewed by political leaders for appointment to positions of responsibility. ADEDY also demands the cancellation of the austerity measures that have been implemented and wants to see salary increases and increased recruitment.