Greece: Far From A Solution


While the headlines say that a new agreement has been reached by Greece’s political leaders, you should be guided by their past behavior. In other words, it ain’t over ’til it’s over. From Bloomberg:

Greece will pledge permanent spending cuts, including lower pension payments and a 20 percent reduction in the minimum wage, as the economy contracts this year at a faster pace than originally estimated, according to the draft of the agreement discussed at the meeting with party heads, and obtained by Bloomberg News.

The troika argues such moves are needed to boost competitiveness. Those opposed say the cuts would deepen the country’s recession, now in its fifth year.

Greece’s private-sector union GSEE has called a 48-hour strike beginning tomorrow, according to an e-mailed statement, sent from the Athens-based union. ADEDY, the public-sector union, is also participating in the 48-hour strike, union spokeswoman Despina Spanou said by telephone.

Prior agreements were also much heralded but the follow-through by the government was lacking. Every one is going on strike tomorrow. 

Here are the key points of the settlement reached:

  • A reduction of 22 percent to the minimum wage, currently at 751 euros per month gross, with an additional 10 percent reduction to the basic salary for young people aged under 25.
  • A freeze on the minimum wage of three years.
  • A freeze on all salary raises until the unemployment level is reduced from its current 19 percent to under 10 percent.
  • A reduction in the pensions of employees of state companies OTE telecoms and Public Power Corporation by 15 percent, as well as of seamen by 7 percent.
  • Placing in the labor reserve scheme 15,000 state employees by the end of 2012, with the target of reducing general government employment by 150,000 by the end of 2015.
  • The reduction from six months to three of the period over which collective sectoral labor agreements continue to be in effect after their expiration. If a new labor agreement is not drawn up in this period, the sector in question will be bound by the basic national standard, without, however, forfeiting benefits for years of service, job hazard, children and education.
  • Collective sectoral agreements will have a limited duration of three years, while existing contracts with a 24-month duration will expire in one year from now.
  • A reduction in contributions to the IKA Social Security Foundation of 2 percent effective immediately, and an additional 3 percent in 2013.
  • A review by end-June of the special salary status of judicial employees, state doctors, diplomats, and police and military personnel.
  • The sale by end-June of scheduled share packages in the following state-owned companies: Public Gas Corporation (DEPA), gas distributor DESFA, Hellenic Petroleum (ELPE), betting agency OPAP, the Attica and Thessaloniki water and sewerage companies (EYDAP and EYATH), and the International Broadcasting Center.
  • The abolition of permanency for employees at state-owned companies and banks.
  • The restriction of tax exemptions, simplification of the value added tax and property tax structure.
  • The closure of 200 tax offices across the country by the end of the year.
  • The hiring of 1,000 more tax auditors, to bring their total number by the end of April to 2,000.
  • Eliminating the extension of payment terms for overdue taxes and social security contributions.
  • A further reduction in military spending by 0.15 percent of GDP.
  • The recapitalization of Greek banks through common shares with limited voting rights and through contingent convertible bonds.

The Greeks don’t like austerity.


8 comments to Greece: Far From A Solution