Abstract
Much has been said about the results of the austerity program implemented in Greece by the “Troika.” The official creditors initially sanctioned an implementation of the agreed conditionality program (included in the MoU that also provisioned the official loans to the Greek government) that principally focused on increasing taxes and labor market reforms that facilitated the fall of private sector wages. As already described, only during the third year of the implementation of the program did they try to complement this tax spree with horizontal cuts in pensions, medical benefits, and public sector wages, that failed to touch the key distortions of both the pension system and the public sector wage structure. Growth-enhancing structural reforms, as defined by deregulation of network industries, professional services, reduction in red tape and corruption, and the privatization of assets that are important for the functioning of the economy, like infrastructure, were not deemed a priority, at least as far as the release of payment tranches to the Greek government was concerned. They were effectively off the agenda, with the exception of a few half-hearted and therefore incomplete attempts. To make matters worse, a number of ill-advised policies and strategic political decision directly undermined the ability of the productive part of the economy to contribute toward the stated goal of an export-led recovery of the Greek economy.
Part of this chapter draws on Mitsopoulos and Pelagidis (2014).
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Notes
- 1.
Indicatively, a cut in the supplementary payments received by public sector employees in the spring of 2010 was soon afterward amended, and this was accepted by the Troika European Commission (EC); European Central Bank (ECB); International Monetary Fund (IMF), in a way that made the setup of a unified payment authority that centrally clears all payments to public sector employees a prerequisite. This authority did not become operational but two years later, thus effectively postponing pay cuts in the public sector till after the summer of 2012.
- 2.
Related three articles by Manos Matsagganis available at the site of the Greek weekly free newspaper Athens Voice (www.athensvoice.gr) with the titles like “Part a: who benefits from early retirement?,” “Part b: who benefits from the cancellation of the pension cuts that violate the Constitution according to a tertiary court decision?” and by Platon Tinios in the newspaper Kathimeriini, www.kathimerini.gr, 26/7/22015, with the title “Mothers of 30 year old minors as a mirror of Greece.”
- 3.
That is, gross wages with the social security contributions of the employee, but not those of the employer, of regular earnings, that is, except bonuses, overtime, and other payments including payments in kind.
- 4.
It should be noted that the employment documented here excludes employment at construction sites, which have a separate legal status as employees are hired by each project for its duration. A significant part of the decline in employment comes from the essential freezing of construction activity, as the decline of employment on construction sites from 120,000 employees in January 2009 to less than 40,000 employees in January 2012 and below 30,000 by mid-2013 reflects.
- 5.
It should be noted that the constraints introduced by sectorial and professional wage agreements and that were abolished essentially through the change in the arbitration mechanism have since been re-introduced in principle through a final decision by the tertiary court. It remains to be seen if this re-introduction in principle will lead anew over time to the distortions that had built up during the past decades. A re-interpretation according to ILO guidelines should in principle avert such a development and seems the way adopted to move forward by the summer of 2015.
- 6.
The reading of Eurostat data on energy prices, which include data on excise taxes, has also led to inaccurate conclusions in many cases. The reason is that large industrial energy consumers in most European countries reach individual agreements with energy suppliers, and these agreements include, among others, highly reduced tariffs and special agreements on how to manage operations during times with high energy demand in the system. The prices of these agreements, as is the case with the rest, are considered industrial secrets, and are thus not revealed and therefore they do not affect the data published by Eurostat, even though in many countries such agreements cover over 50% of industrial energy consumption. In Greece on the other hand all consumption of energy is at the officially set prices published by Eurostat.
- 7.
- 8.
Even more important is that only three European countries (Denmark that is not included in the figure, Austria, and Finland) have highest excise taxes in industrial use both for gas and for electricity. Finland will reduce the January 2015 tax carbon dioxide for combined heat and power production by 50%. Of particular interest is the specific energy consumption taxes for industrial use in Spain and Portugal compared to Greece. Indeed, the high taxation of both electricity and natural gas production activities in Greece is unique even compared to other southern countries. The policy of an excise tax on electricity used for industrial production in these two cases appears to be identical to the loss of annual exports of EUR one billion for the country, regarding only for industries of steel and textiles/clothing.
- 9.
Existing loans up to one million euros. ECB data.
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Pelagidis, T., Mitsopoulos, M. (2021). Greece: Why Did the Forceful Internal Devaluation Fail to Kick-Start an Export-Led Growth?. In: Who’s to Blame for Greece?. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-64081-1_7
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