ATHENS – Under the gun from international lenders to make another $14.16 billion in cuts on top of crushing austerity measures that have hit workers, the elderly and the poor, Greece is set to put some 40,000 workers in layoff pool with a 60 percent pay cut – and fire them next year.
The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) is demanding that Greece reduce the public workforce by 150,000 workers over the next three years to get a second bailout of $173 billion, without which the country will not be able to pay workers and pensioners.
Greece is surviving on a first series of $152 billion in rescue loans from the lenders, who insisted on deep pay cuts, tax hikes and slashed pensions that have worsened a five-year recession, put 1.15 million people out of work and shrunk the economy by 7 percent.
Reneging on yet another campaign promise, Prime Minister Antonis Samaras said he would follow Troika orders to lay off the workers despite his pledge to save their jobs when he was campaigning before the critical June 17 elections. He has also backtracked on a pledge to renegotiate terms of the harsh austerity measures that have crippled the economy in order to insure that foreign banks and investors are paid back before social programs are financed. Reuters reported that the so-called labor reserve pool which a previous government sacked before it could be implemented is being brought back, setting up a likely clash between the new coalition government with labor unions who’ve vowed to fight layoffs tooth and nail.
Samaras is ruling an uneasy coalition that includes his New Democracy Conservatives who barely won the elections without enough of the vote to form a government, forcing him to bring his bitter rivals, the PASOK Socialists and Democratic Left into his government, although they barred any of their members from serving in his Cabinet.
If Samaras proceeds, he could face a showdown with the powerful labor unions that are at the heart of the Leftist parties’ constituency, and who have vowed to take to the streets with the same kind of protests and strikes that brought down the government of former PASOK leader and then Prime Minister George Papandreou in November of 2011. He had imposed austerity measures on the orders of the Troika, setting off ceaseless demonstrations and riots, which could resume in September when Greeks return from traditional August vacations and find many of them are going to be fired.
The government’s economic team will present details of the plan, once a political taboo in Greece, to the political leaders supporting the ruling coalition as the only way to convince international lenders to keep cash-strapped Greece afloat. “The labor reserve plan will go ahead this time,” one senior government official told Reuters on condition of anonymity. “Last time, it just didn’t happen.” Athens pledged last year to gradually lay off 30,000 civil servants from an estimated 700,000 public sector employees as part of its bailout deal.
Under the failed plan implemented by the previous PASOK government, the 30,000 civil servants were supposed to be placed in a “labour reserve,” where they would receive 40 percent of their salaries for a year before being laid off. Only 6,500 left, mainly through retirement as critics said Papandreou lacked the political will to fire them in a move that would have been antithetical to the platform of the party that his father, former Prime Minister Andreas Papandreou, founded.
A RED LINE
Samaras, desperate to find ways to meet the fiscal targets set by the Troika, has reversed himself on virtually all of his campaign pledges and got PASOK leader Evangelos Venizelos and Democratic Left chief Fotis Kouvelis to accede to him, although Kouvelis said the layoffs are a “red line” that he won’t cross, fearing a rebellion in his party. Venizelos, a former finance minister who doubled income and property taxes, was said to be more flexible and follow Samaras’ lead despite raising some objections to the firings.
The government said it has no choice but to begin the layoffs, although it has failed to go afer tax evaders costing the country some $70 billion and is protecting “special salaries” of judges and military officers. Also said to be included in the coming cuts are further reductions in pensions, including for the poorest elderly.
A government official who was not identified said the labor reserve pool is a measure that has to be taken, no matter the political cost, although it could break apart the coalition as many Greeks have said they don’t believe the new government will last and critics said more social unrest seems certain. “This is a measure that may not produce dramatic and immediate savings but it will give credibility to all our efforts to reform,” said a second official who did not want to be named, according to Reuters.
Cuts to ministries spending, already brought down to a minimum during two years of adjustment in the wake of the debt crisis, and merging of state entities is expected to bring about $4.9-$6.1 billion in savings. Most of the new cuts will come from another round of reduction to state salaries, pensions and benefits, as they make up two-thirds of the government’s 82 billion euros of annual spending, excluding interest payments, the officials said.
Greek workers have already had their pay cut about 30 percent, lump sum retirement benefits they earned cut by more than 40 percent and faced a barrage of tax hikes, all of which have failed to slow the slide toward insolvency as tax revenues have fallen far short of expectations because beleaguered Greeks have slowed spending almost to a standstill. The jobless rate has hit 23.1 percent with some predictions it could hurt 30 percent, which would make it the highest in the civilized world.
A FIASCO IN THE MAKING
The government also plans to let go of tens of thousands of temporary contract workers by streamlining its needs across ministries and state entities, the officials said. Finance Minister Yannis Stournaras said that the labor reserve issue was being examined because the government was still $4.3-$4.9 billion short of reaching its goal to cut spending $14.16 billion over the next two years. The Troika said if the goal is not met that the rescue loans would be cut off and Greece’s troubled economy would collapse, with critics fearing the country would be fall into complete chaos.
The Greek constitution bars firing civil servants and no political party has dared so far to directly dismiss staff in the bloated and ineffective state sector. “I’m categorically against the labor reserve,” Kouvelis said after party leaders met to discuss the issue earlier in the week. “It proved a fiasco and I can’t support a fiasco.”
Labor analysts said the reserve measure failed last year because large sections of the civil service such as doctors, nurses and teachers were excluded, many opted to retire early rather than be forced out, and some state organizations refused to cooperate by not giving data about their staff. The private sector in Greece has also been hit hard by the recession, with an estimated jobless rate of 33 percent, making the country’s harshest critics convinced Greece can’t be saved no matter how much money it borrows.
The crisis was caused largely by successive New Democracy and PASOK governments packing public payrolls with hundreds of thousands of needless workers for generations – evident to anyone who visited a public office to see workers sitting around smoking and drinking coffee – in return for votes. The axe will fall hardest again on Greece’s most vulnerable – the poor, elderly and workers who have taxes taken out of their pay – while again exempting the country’s rich elite and tax cheats.