In 2008 Greece was not influenced by the crisis but later in 2009 the country fell into recession and the financial markets exerted pressure, which made the economy being vulnerable. At the beginning of the sovereign debt crisis, the budget deficit of Greece was erected at 13.6% from 12.7% (Eurostat, Euroindicators, 22/2010, 22 April 2010) and the external debt at 127% of the GDP (Eurostat, Euroindicators, 60/2011, 26 April 2011). In order to to deter a default on its sovereign debts, the government of Greece agreed on a loan by Eurozone states and the International Monetary Fund (IMF). The loan agreement was 80 billion € from Eurozone states and 30 billion € from IMF. The agreement was between the Greek government and the European Commission (EC), the European Central Bank (ECB) and IMF (the ‘Troika’), in which they agreed that the EC, ECB and IMF had to prepare a program for Greek economy. The Ministry of Finance in cooperation with the ‘Troika’ prepared a program called ‘Memorandum of economic Policy and Financial Policies; (MEFP) and the ‘Memorandum on Specific Economic Policy Conditionality’ (MSEPC)(The Memoranda). The MEFP had to do with the fiscal reformations and income policies that Greece had to undertake. The Memoranda was connected with the Act 3845/2010 on ‘Measures for the Implementation of the support mechanism for the Greek economy by the Eurozone Member states and the International Monetary Fund’ and the Greek Parliament enacted into law on 5 May 2010. The reformations outlined in Memoranda aimed at the decrease of public expenditure. The main purpose of Memoranda was to create a more attractive environment for business. In order to achieve this target they cut public investment and public sectors wages. In addition, they reformed the pension system, diminished the public sector by trying to privatize a big part of public sector. Also, they reformed the system of collective bargaining (Ec.europa.eu, 2016).
The main reason that government singed the Memorandum was to decrease labor costs and create flexibility at the labor market, trying to achieve ‘cost moderation for an extended period of time’ (IMF, 2010: 59). They decided to reduce wages; something that was more feasible in the public sector because wages are controlled only from the Minister of Finance and the government does not have to negotiate with the unions. However, an intervention like this in the private sector would be considered a default of free collective bargaining processes and it could not be managed without ‘a fundamental restructuring of individual and collective labor law’ (Kornelakis and Voskeritsian, 2014). There are some changes that occurred in the institutional framework. The government took some measures in order to mitigate the labor costs through some changes in individual labor law. The main aim of these measures was the reduction of overtime cost and the cost of firing workers while ‘introduces provisions for the promotion of flexibility and modified the upper limits regarding collective redundancies’ (Kornelakis and Voskeritsian, 2014). Furthermore, a second aim of the measures was the decentralization of collective bargaining and a modification at the procedure of arbitration and mediation.
In April 2009, the European Council recommended that ‘strengthen the fiscal adjustment in 2009 through permanent measures, mainly on the expenditure side’ (Europarl.europa.eu, 2016). But the policy was limited by the electoral cycle. At the end of 2009, PASOK, which was the elected government, legislated that all people who work at public sector could have been recruited by Public Sector Hiring Authority (ASEP) from December 2009. In 1994, the legislation about ASEP was that all the recruitment of employees in the public sector was doing by ASEP, but there were numerous waves of ‘exceptional’ recruitment. There were many situations that public sector used to hire employees on fixed-term contracts that later were made permanent.
However, this policy moved towards the expenditure side after the decision of the Council on February 2010 ‘giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situational excessive deficit’ (EC, 2010). The guidance included almost all policy areas of the employment relations at public sector, such as selection and recruitment; pay policy, managements in public services, privatization. The first package of frugality was in March 2010, when the Commissioner Rehn visited Athens and the aim of the frugality was the reduction of the deficit by over 2 percent of GDP. This could happen through a raise in Value Added Tax (VAT) and in some other taxes and a primary cut in the bill of wages.
Consequently, in March 2010 started the pay cuts in public sector and they developed into five steps of successive measures integrated into the emergency legislation. To the beginning of 2010 the pay cuts of public sector were backdated and they ended in 2012 with an introduction of a new pay policy for workers of the public sector. The new pay policy rearranged pay scales and it became standard from January 2013. Another pay cut followed that period (January 2013) and it was about the Christmas, Easter and holiday bonuses (the 13th and 14th month salary). Also, that period of time the collective agreements, which were about increases, at the beginning were frozen and then abolished (Ioannou, Ioannou and profile, 2016)
The ‘first step’ of pay cuts at public sector was in March 2010 enforced from January 2010 a 12 percent in bonus payments and 7 percent reduction on those employees who had a fixed salary and those who did not receive bonuses. This percentage also applied to the employees of the public sector who had private sector contracts and there was a reduction 30 percent at the bonuses for Christmas, Easter and holidays. In addition, the overtime was reduced from 60 to 40 hours per month on March 2010, per employee. Also, on March 2010 applied pay caps of just under 6,000€ per month and every clashing arrangement in collective agreements were repealed (Katz, . Kochan and Colvin, 2015).
The ‘second step’ was in May 2010 and there was a further reduction 8 percent of the bonuses and 3 percent reduction of lump sum for the employees who did not receive bonuses and for those who had private contracts. Finally, the bonuses were reduced to 250€ for Easter and holidays and 500€ for Christmas and for employees whose salary exceeding 3,000€ the bonuses were abrogated (Katz, . Kochan and Colvin, 2015).
The ‘third step’ was in December 2010 and these cuts included a reduction across-the-board of 10 percent from January 2011 for those employees whose annual salary exceeded 21,600€. The monthly pay cap of public sector was reduces to 4,000€. Also, they decided that the total pay cut should not be more than 25 percent since 2010. This step also comprised lower limits for overtime (20 hours per employee per month) and a reduction between 30 and 50 percent in performance allowances, which are paid in sections of public sector by collective agreements or arbitration rewards and ministerial decisions (Katz, . Kochan and Colvin, 2015).
The ‘fourth step’ was generated in November 2011 which proposed a new pay policy, following the one of March 2010, a ‘unified remuneration system’ that was proposed by a committee devoted to influencing wages within the public sector. This step included new pay cuts over 35 percent and this was set as a temporary ‘floor’ (Katz, . Kochan and Colvin, 2015).
The ‘fifth step’ was in November 2012 and it had to do with the Christmas, Easter and holiday bonuses, which were totally eliminated. Life-time tenure was also eliminated in public corporations. Also there was a reduction of 12 percent for the ‘special wage regimes’ that included judges, professors, employees of the police and armed forces in order to create a similarity on their wages according to the new pay system. Also, a reduction to pensions took place for those whose monthly pension was exceeded 1000€ (Katz, . Kochan and Colvin, 2015).
At the same time the Greek government decided to reduce public sector jobs. At the public sector there were three categories of employment conditions. Firstly employees of public sector with public law contracts, secondly employees with private law contracts and thirdly employees with temporary or fixed-term contracts (Ioannou, 1996). The government, in order to cut jobs, implemented obligatory redundancies within a preretirement scheme offering 60 percent of pay on behalf of one year. According to this plan, in 2011 the government decided the drastic reduction of 20 percent of the employees and that means over 150,000 job cuts in the public sector by 2015 (IMF, 2011: 34; 2012: 108).
YEAR NGCA WAGE in € PERCENTAGE OF CHANGE
2008 2008-2009 701 ¬+6,45%
2009 2008-2009 739,56 +5,5%
2010 2010-2012 739,56 0,0
2011 2010-2012 751,39 +1,6%
2012
>AGE 25 Law 4046/12
586,08 -22%
2012
<AGE 25 Law 4046/12
510,95 -32%
2013
>AGE 25 Law 4046/12
586,08 0,0
2013
<AGE 25 Law 4046/12
510,95 0,0
Source: NGCA 2000-2012, Law 4046/2012
(NGCA: National General Collective Agreement)
Looking at the table we can see how fast was the reduction of wages after the austerity measures. We can clearly notice that there was not a big variation from 2008 until 2011. After the implementation of the Law 4046/2012 we can see a reduction of 22 percent for those who were above 25 and 32 percent for those under 25 years old. By this movement the government wanted to increase youth employment (Karamanis and Naxakis, 2014).
The program of the government, which was implemented since 2010, was built on unilateralism and it created confrontational behaviors. According to the report on the High Level Mission to Greece by ILO we can see that ILO supported that ‘the current environment was very difficult for constructive dialogue but ultimately such policies worked best where they had been devised by those expected to implement them’ (ILO, 2011: 57). Also, that time unions preferred not to discuss with the Fund. People who work at IMF had contacts with the Unions and employers and they knew that the relationship between the Government and Social partners was not built up on trust. As a result, this relationship made more difficult the procedure of finding ways to deal with the problems that Greece had to face (ILO, 2011: 57). Furthermore, that period erupted massive strikes with protests and social enlistment and the limited institutional means for regulation of the employment relations in the public sector across collective bargaining or consultation were cancelled. Moreover, the trade union for the public sector ADEDY (Confederation of Greek Public Servants) highlighted the ‘lack of proper dialogue and consultation in this difficult period’ and as Lanara (2012) supported ‘The possibility to renegotiate some of the terms of the EAP via social partnership consensus would be of crucial importance in alleviating negative impact and social tension’. After the changes that happened in Greece during the years 2010-2012 the employees of the public sector had the right to join to trade unions from ADEDY and they retain the right to strike and the employees of public sector who had private contracts had the right to join unions from private sectors but without bargaining rights.
Moreover, as referring to the private sector except from the massive change at collective agreements but also because there was a less controlled labor market situation, employers had the choice to ‘exit’ from the formal economy of the country (Zambarloukou, 2006). The Greek capitalism had some characteristics such as the undeclared work and the shadow economy. At this situation there is not existence of laws and there is limitation of credible sanctions for the avoidance of undeclared work. The analysis of cost-benefit drove the firms to the road of informality. The employers negotiated to reduce wages ‘under the table’ or they wanted an one-sidedly impose of pay-cuts. It was really common that period of time that employees were unpaid for many months. Some of them, changed as part time workers but they still worked as full time and this had the result for the employers of saving money (Kornelakis and Voskeritsian, 2014).
At that time, Greek economy could be characterized by large fiscal deficits, high level of unemployment and huge debt and there were the negative effects of the crisis 2009. This situation accelerated the recession of the Greek economy (Bank of Greece, 2009). Before the recession the unemployment rate of Greece decreased from 11.3 percent in 1998 to 7.7 percent in 2008. After the Memorandum the unemployment rate rose from 12.6 percent in 2010 to 17.7 percent in 2011. Additionally, there was a further increase of unemployment in 2012 to 24.3 percent (Bakas and Papapetrou, 2012).
YEAR
EMPLOYMENT
UNEMPLOYMENT AVERAGE PERCENTAGE OF UNEMPLOYMENT PERCENTAGE UNEMPLOYMENT 15-24 YEARS OLD
2008 4.559,3 377,9 7,7% 22,1%
2009 4.508,7 471,1 9,5% 25,5%
2010 4.338,6 628,7 12,6% 32,6%
2011 4.090,7 876,9 17,7% 43,6%
2012 3.763 1.203,8 24,3% 55,2%
2013 3.613,4 1.353,5 27,2% 58,5%
Source: EL.STAT data processing (Statistics.gr, 2016)
As we can notice at the table there was a massive increase at the percentage of unemployment in Greece through the five first years of recession from 2009-2013. Having in mind a recent study, there was a reduction of firing cost and this created quickening to the firing rates, therefore this caused a massive increase of unemployment rates (Koutenakis, 2012). During the period of 2009-2012 there was a reduction of 27.7 percent in the amount of new contracts. Dedousopoulos (2013) supported that the total amount of job losses during these years was estimated around 871,000 job positions. He referred that it will take 14,5 years to have the same rate of unemployment with the period before the crisis.
As a result of these developments in Greek economy many young people with plenty of talent were forced to leave Greece and go to another country either for studies or for finding a job. According to Practikakis (2013) since 2010 nearly 120,000 of young people who were educated left the country and this amount represented that time the 10 percent of high skilled workforce (Praktikakis, 2013).