- Observatory: EMCC
- Published on: 02 March 2008
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A phenomenon that operates more on a symbolic level (as the threat from the closure of units of production and/or their relocation to other, low-labour-cost countries), resulting in the creation of a climate of social insecurity, and less as the already existing generalised negative reality regarding employment and industrial relations: this seems to be the picture to date given by the impact of globalisation on the world of work in Greece. The negative impacts involve specific labour-intensive sectors, such as clothing, footwear and furniture manufacture, where units of production have been closed down or relocated to countries of Central and Eastern Europe, resulting in the loss of thousands of jobs and high employment rates in specific areas of the country (northern Greece).
Institutional responses to globalisation
Government action to prevent or to reduce the extent of off shoring/ relocation.
The Greek state, under previous social democratic governments as well as the present conservative government, has failed to implement policies to safeguard against relocation of enterprises or parts of enterprises from Greece to other countries. One of the reasons that such a stance was imperative was the fact that the industrial sector in Greece has undergone a sea change in the last 20 years, going from an activity that up to the mid-‘80s was protected by tariffs and public procurements policy, has evolved in the ‘90s into a sector fully open to international competition. Nevertheless, due to the problem of unemployment that has been identified in specific industrial activities (e.g. textiles, clothing, footwear) and in specific areas (mainly in northern Greece), one of the causes of which is the phenomenon of relocations, successive Greek governments, through a series of provisions in various development laws, have provided incentives on the one hand for reducing unemployment and increasing employment in these areas, and on the other for creating a business environment conducive to the creation of new enterprises and support of the existing ones.
A more recent example of a Development Law aimed at providing incentives to increase employment and create and support enterprises is Law 3299/2004 Private investment incentives for economic growth and regional convergence, which replaced the previous Law 2601/1998 Private investment aids for the country’s economic and regional development. To be sure, the more recent Law 3299/2004 dissociates state subsidies from the number of jobs created, as foreseen in the previous Law, and this has led the social partners to make different assessments of the effectiveness of the measure. The new development law provides for higher subsidies for small and medium-sized enterprises, which may even reach 55% in enterprises doing business in areas near the country’s borders and in prefectures where per capita GDP is 65% or less than the EU average.
In addition, in February this year the Special Social Solidarity Fund (ETKA) was set up. Article 2 provides for …income support for long-term unemployed and people dismissed due to restructuring of production in the enterprises where they work, since they face serious difficulties in being reintegrated in the labour market and are nearing retirement. The conditions for inclusion in the provisions of the article refer to employment in enterprises in sectors of the economy that are in decline and have their production units in areas where the unemployment rate is twice the national average.
In conclusion, it can be said that the policy of Greek governments regarding prevention of relocation of units of production to other countries has been not to intervene to directly prevent them, but mainly to mitigate the phenomenon, on the one hand by providing incentives for enterprises to be created, set up and remain in Greece (mainly in border areas that have been affected more by the reindustrialisation of specific sectors) and on the other by protecting the workers that have been affected.
Social partner attitudes towards off- shoring/ relocation
The possibility or threat of relocation of production has not been the direct subject of collective bargaining in Greece in recent years. Since 1998, no National General Collective Labour Agreement (EGSSE) has made direct reference to relocation or restructuring of production as a threat to the conclusion of collective agreements. Nevertheless, in the discussion on the signing of the new EGSSE (2006-2007) the employers expressed some views, according to which workers in prefectures or sectors with high unemployment rates should be exempted from the pay regulations of the new Agreement. Basically, the employers argue in favour of combating unemployment and preventing company relocations. The statements made during interviews by the then President of the Federation of Greek Industries (SEV), who came out against increasing the minimum wage in specific areas with high unemployment rates, are characteristic: In an area where unemployment stands at 20%, is there any sense or reason in our raising the bar higher? At another point in the interview he said, I am speaking having in mind mainly the troubled companies and industries with very serious competition problems. We have many, many industries whose future is a real concern and there are many, many thousands of jobs involved. On the other hand, we have 500,000 people who are more or less unemployed; what they want is to find a job and get some insurance stamps. Could we be placing the bar too high? (Statements by former SEV President U. Kyriacopoulos on Athina 9.84 radio station, 21/12/2005, source: SEV). In the end, however, there was no exemption or respective regulation when the current EGSSE was signed.
In the context of the involvement of the social partners for the purpose of supporting employment policies and combating unemployment, beginning in 1998 with Law 2639/1998 Regulation of labour relations and other provisions, the Local Employment Pacts (TSAs) were promoted in Greece. Under certain conditions, they allow pay lower than that set in the industry-wide collective labour agreements, up to the limit set in the EGSSE. As a result, the local unions, despite any minor or major reservations, participated in the TSAs, and the trade union movement as a whole formulated and submitted through GSEE proposals to create a joint strategy for the local actors on unemployment, employment and social cohesion, promote employment through local development, seek alternative policies and actions on the local level leading to the creation of permanent, full-time jobs and avoid interventions “from above” through recommendations on the objectives and content of the TSAs.
As regards the question of whether in the recent period cases have been observed where the unions have succeeded in preventing plans to relocate production to other countries, or whether they have managed to reduce the extent of that phenomenon, or even whether they have agreed in cases of relocation of all or part of production for the purpose of saving some jobs, to date nothing like this has been noted. In fact, it appears that the correlation of forces has shifted away from saving workers’ jobs, towards providing support for workers and areas against the negative consequences of relocation, since on the one hand the recent Development Law 3299/2004 dissociates subsidisation of companies from the obligation to create new jobs, and on the other hand it allows them to join the scheme where foreign investment schemes receive aid under certain conditions.
Government policy on foreign- owned firms controlling significant sections of the economy.
The Greek state has not developed specific actions to restrict the acquisition of Greek companies by foreign companies in specific sectors, or the establishment by foreign firms of subsidiaries in Greek territory, or finally the prohibition of acquisition of Greek companies in specific sectors. The following should be made clear, however: First, there are similar restrictions in force on the Community level, for preventing the possibility of monopoly situations arising in the markets. Second, until recently Greece had managed as part of the EU to maintain the protective statutory framework (cabotage) for Greek coastal shipping companies active in its seas. This protection was in the form of an obligation for the companies to be entered in the Greek register of ships, of conditions of oligopoly in coastal shipping links as a whole and subsidisation of the links to unpopular island destinations. To be sure, the above-described framework did not prohibit the acquisition of Greek companies by foreign ones. The third observation concerns the broader debate that has arisen in the last three years on the government’s intention to sell of the Hellenic Telecommunications Organisation (OTE) in the form of full privatisation. One of the arguments adopted against full privatisation of OTE was the possibility that such a sensitive sector might come under the control of a telecommunications company in an unfriendly country.
By and large, since the 1990s Greek governments have oriented themselves toward opening up the markets and attracting foreign investments, either through foreign firms acquiring Greek companies or setting up their subsidiaries in Greece without any special restrictions.
Social partner responses to take over of domestic firms by foreign- owned ones’.
No cases have been reported where unions or companies have been opposed to the takeover of Greek firms by foreign-owned ones due to the nationality of the latter.
Attitudes to globalisation
For the employer organisations, globalisation is an opportunity and a challenge to adapt companies and the environment as a whole to the demands of international competition. An indication of the extent of adaptation to the international environment and a necessary precondition for taking any action is the competitiveness of the economy and companies. According to the Charter of Rights and Obligations for Enterprises drawn up by SEV (www.fgi.org.gr), an enterprise has the right of access to a unified and effective European market that would not be restricted by State or private monopolies and would operate under conditions that would not harm the direct or long-term competitive capacity of that enterprise or of the economy as a whole (Principle 4, para. 1). Furthermore, in an opinion issued by the Economic and Social Council of Greece (OKE) (www.oke.gr) on new development Law 3299/2004 (OKE Opinion 122, 12/2004), representatives of the employer organisations voiced their positive attitude to the government proposal to subsidise business plans in other countries, because the extension of production activities to foreign countries is in many cases a business choice that is either necessary for the company to remain in operation or that gives rise to a significant increase in its turnover.
For the world of work, relocations are one aspect of the opening up of economies to international competition. The attempt to maintain competitiveness by reducing pay, exacerbating working conditions and labour relations, or reducing companies’ tax coefficients, policies used to a high degree to attract foreign investments or avoid relocations by reducing labour costs, have proved to be incapable of supporting structural competitiveness, as they often create a negative development, without the expected improvement of the level of competitiveness (commentary from the 2006 INE/GSEE Annual Report, www.inegsee.gr). According to this report, the unions’ strategy in the dynamic evolution of the phenomenon of relocation must be focused on maintaining and extending workers’ rights, as well as empowering the trade union organisations on the national and international level, to enable them to control the prospect of uncontrolled relocations. On the international level, actions such as implementation of the International Labour Conventions, linking trade liberalisation in the context of the World Trade Organisation (WTO) with the basic Labour Conventions of the International Labour Organisation (ILO) must be taken, addressing relocations as a social phenomenon, through annual social planning on the part of companies. On the European level the European Works Councils Directive must be reoriented towards bargaining rather than merely information and consultation, tax harmonisation on the EU level for company profits and capital income, and provision of additional financing for increased social policy measures, especially in the case of relocations. On the national and regional levels, the consequences of relocations for workers and the local economies must be dealt with as a social phenomenon. There must be a strategy for local development oriented towards integrated clusters of activities, highlighting of local comparative advantages and the creation of alternative activities that will permit the reintegration of the labour force and its orientation towards new productive activities of the regional and local economy.
As regards the matter of public opinion polls on the aspects of globalisation being studied, Greek society continues to have reservations, as also shown by the relevant Eurobarometer studies, about the impacts and aspects of globalisation on economic life. The most recent poll was performed by SEV last March, on the occasion of the 50th anniversary of the creation of the European Union. It was a telephone poll referring to Greece, on a sample of 1000 people, which took fully into account proportional representativeness with regard to urban and population characteristics. Quotas were maintained with regard to sex and age, on the basis of census data from ESYE. There were no specific questions on individual aspects of relocation (on the poll, see www.anoiktoforum.gr). According to the findings of the part of the poll dealing with entrepreneurship/relocation, 45.4% of the respondents believe that Greece will benefit from the business activities of Greek companies in the Balkans and the entry of foreign companies into Greece. This percentage is made up 29.4% of the respondents who believe that Greece will benefit because Greek companies will increase their sales in the Balkans, and 16% who believe that Greece will benefit because foreign companies will come into the country. By contrast, 49.9% of the respondents believe that Greece is being harmed by these phenomena. This percentage is made up of 17.5% of the respondents who believe that Greece will be harmed because the country’s foreign companies will move to the Balkans due to relocation, whereas the other 32.4% believes that Greece will be harmed because some Greek companies will move to the Balkans. Also in the same poll, 40.8% of the respondents believe that relocation of Greek companies is a threat to the Greek economy, 27.9% believe that relocation is an opportunity for Greek companies to improve their position in international competition, and 25.9% believe that relocation is necessary for the Greek economy so that Greek companies can hold their own in international competition.
In conclusion, the findings of the 2003 Euro barometer survey and the recent SEV survey show that over time Greek society appears to be taking a cautious attitude towards these specific aspects of globalisation. The causes of this attitude should be sought in the insecure economic environment, which is on the one hand made up of high rates of unemployment and long-term unemployment, especially among dynamic categories of the population, such as youth and people with academic qualifications, where planning their personal prospects is more necessary than for other categories of the population. This makes it imperative that they have a minimum of security which has not to date been guaranteed by existing globalisation. On the other hand, this attitude can be explained by the development of policies aimed at boosting competitiveness through actions to restrict labour costs rather than by the development of innovation and the labour force.
National Centre Commentry
Although the impacts of the existing aspects of globalisation, such as relocation of Greek companies or their acquisition by foreign companies, on employment in Greece appear to have a restricted direct impact, which appears in specific sectors and areas, the sense of an increasing potential threat causes social insecurity, which leads to macroeconomic impacts via reduced consumption. In other words, this is favourable to restrictive economic policies focused on labour costs.
Stathis Tikos, INE/GSEE