Greece: Widespread protests at proposed social security and tax reforms

There has been widespread opposition, including general strikes and mass demonstrations, to proposed reforms to the social security and taxation system. The reforms, unveiled in January 2016, were prompted by the need to comply with the terms of the most recent financial assistance programme coordinated by the European institutions and the International Monetary Fund.

Background

On 4 January 2016, the Greek Ministry of Labour sent the final plan for the reform of the social security system to representatives of Greece’s social security institutions, having first presented it to political leaders and the President. The Prime Minister had stated that proposals for reform to primary pensions were non-negotiable. The 170-page text included the following key points:

  • All social security funds would to be combined into one fund and replaced with one main social security provider, with uniform rules for calculating contributions and pension provisions.
  • Main pensions would be determined using a new method of calculation, based on the total working life of the insured person, with banded replacement rates. The final pension received by the insured person would be based on contributions paid, years worked and replacement rate.
  • National pension would be paid without income criteria to anyone with at least 15 years of insurance.
  • Social security contributions would be increased by a total of 1.5 percentage points: 1 percentage point for employers and 0.5 for employees. This would avoid the need for a reduction in pensions.
  • The social solidarity fund, EKAS, would be phased out and wound up by 2019.

These proposals provoked a series of strikes and demonstrations among the majority of workers in both the private and public sector, ranging from farmers and scientists to employees in local government, ports and shops.

Ongoing opposition from lawyers

A nationwide abstention of lawyers from their duties, including court hearings, began on 12 January 2016 and was due to continue without interruption until 6 June, becoming in effect a long-term strike. The Steering Committee of the Athens Bar Association stated its categorical opposition to the overall logic of the government bill, saying that it would lead inexorably to economic and professional destruction for the vast majority of lawyers. The committee pointed out that lawyers are already unable to afford current levels of social security contributions. It claimed that any rise in rates, in combination with already heavy tax obligations, would reduce their incomes to nothing and increase the rate at which people were leaving the legal profession.

In a recent announcement, the Athens Bar Association listed a number of complaints about the new law, arguing that:

  • it is flagrantly unconstitutional in many respects;
  • it does not take into account the ability of insured and self-employed lawyers to pay taxes and contributions and leads to an onerous and unsustainable tax and contributions burden;
  • it does not, as it should, establish a tax-free personal allowance for the self-employed;
  • it does not ensure that benefits are commensurate with contributions;
  • it is not accompanied by an actuarial study that makes an objective case for the new regime.

In this context, it recommends that all available legal remedies be lodged against the administrative acts due to be adopted under the new law, in order that its unconstitutionality can be proved in court. Salaried lawyers of social security institutions are also to advised to refrain from all actions that fall within their duties concerning the implementation of the new law including preparing opinions and draft administrative acts.

Industrial action

Demonstrations by farmers

After 40 days of protest, including the setting up of roadblocks across Greece, farmers temporarily suspended their action on 27 February 2016. However they warned that they would go to Athens to protest again when the social security and taxation bill went before Parliament. Their decision was influenced by the government’s commitment to a personal tax-free allowance of €9,500, an attempt to protect farmers’ homes and fields from seizure by creditors, and an intervention in Parliament to stop the prosecution of farmers. The government rejected other requests made by farmers on the grounds of cost. These included tax-free oil, lower electricity rates and exemption from VAT for farmers. The government argued that farmers were already subsidised through the ‘farmer’s card’, but made a counter-proposal of zero-interest loans for farmers and said they would seek to minimise the current interest rate of 6.95%.

Trade union actions

A general strike called by the General Confederation of Greek Workers (GSEE) and the Supreme Administration of Greek Civil Servants’ Trade Unions (ADEDY) was held on 4 February 2016 and prompted mass rallies across Greece against the proposed social security reforms. The strikes and rallies were supported by trade unions and professional bodies, and the level of participation in the 24-hour general strike was unprecedented. The motto of the strike was ‘a sustainable social security system without cuts; insurance and a pension for all generations’. Employees, freelancers, the self-employed, farmers, pensioners and the unemployed responded to the call from GSEE to express their anger and frustration at the ‘the Government’s unfair, harsh and destructive social security measures and the punitive austerity measures that they are implementing at the behest of the creditors’.

On 6 and 7 May, GSEE and ADEDY called a 48-hour general strike that prompted nationwide rallies against the social security and taxation bill that was being voted on in Parliament. In its announcement, GSEE accused the government of fast-tracking the process and hoping to catch society unawares by voting over a weekend for the bill. GSEE described this move as a ‘parliamentary coup’ and called on opposition parties to condemn it. ADEDY called on all employees to join the strike and protests called to oppose the new measures agreed between the government and lenders. The new measures included an increase in VAT from 23% to 24% and increased taxation on items such as unleaded petrol, liquefied petroleum gas, natural gas, tobacco and cigarettes and alcohol.

Employers’ response

A statement from four employer social stakeholders – the Hellenic Federation of Enterprises (SEV), the National Confederation of Hellenic Commerce (ESEE), the Hellenic Confederation of Professionals, Craftsmen & Merchants (GSEVEE), and the Greek Tourism Confederation (SETE) – set out their intention to cooperate closely with the government to implement immediate measures to stabilise the economy and attract investment.

The priorities, said the statement, were a stable and progressively more attractive tax framework, a friendly business environment and incentives for development and investment. Within this framework, they said, they were not opposed to a small, temporary rise in social security contributions as part of the social security reform.

However, the employer organisations argued that the proposed legislation on social security reforms – the bill on ‘Urgent provisions for the implementation of the agreement for fiscal targets and structural reforms and other provisions’ – contained additional taxes that would affect every aspect of Greek entrepreneurship. The rise in VAT from 23% to 24%, and the inclusion of a number of products, goods and services in the VAT regime were among the additional burdens the country’s businesses were being asked to carry. Other proposals, such as the sevenfold increase in the tax paid by real estate investment companies, would excessively burden Greek businesses and private sector employees and at the same time discourage investment and damage the likelihood of recovery of the economy.

Commentary

Despite extensive and strong opposition, the social security and tax bill was approved in early May by the Plenum of the Parliament by 153 votes to 143. The government was under strong pressure from the country’s creditors: disbursement of a further instalment of the financial bailout under the Third Economic Adjustment Programme was conditional on successful completion of the first review of the programme’s progress and on reform of the social security and taxation system. Despite Parliament’s approval of the legislation, certain categories of professionals, such as lawyers and engineers, continue their strike action.

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