Friday, 3 February 2006

A Seminal Liberalisation

Over-privileged workers, chiefly in the public sector and banking, work short hours, often making time for second jobs, and retire early, often in their fifties. In the process, they are stifling the rest of the economy

Across-the-board wage agreements have been the norm in Greece for decades. They hold particularly strongly for manufacturing industries like textiles and metallurgy. In banking, they started well before the Second World War and were formalised in 1955. The socialists under Andreas Papandreou strengthened the hand of federal unions in the process, but never was the negotiation process between employers and such federal unions, comprising entire professions, mandated by law. It has been the practice of habit, under threat of prolonged strikes. 

The Hellenic Federation of Bank Employee Unions has now been told by the nation's six biggest banks that they will no longer feel obliged to sit at the same negotiating table. Instead, the banks will negotiate directly with their own employees.

The concerted nature of the announcement - six letters to the federation dated January 31 - and its confidence strongly suggest that while the government has been silent on the matter, it has given bankers the nod they have been waiting for. If nothing else, the three publicly-controlled banks would have had to proceed with political approval.

There is also a commonality of argument between the letters, as if they were the products of a meeting. The country's top bankers all cite differing business plans, a demanding public and a competitive international environment. The letters share a tone of exasperation best expressed by Nikos Nanopoulos, CEO of Eurobank: "We have decided that the matters you put forward for discussion are a far cry from the issues that concern us most, while some of your demands are unrealistic. As examples I note the excessive pay rise of more than 10 percent, which would burden operating costs..."

The president of the federation, Dimitris Tsoukalas, warns that banks' ultimate aim is to break the power of their own unions as well, and end up negotiating with individual employees.

The day may come when the hand of labour needs to be strengthened because capital has come to dictate the conditions of the job market without humanity, as it did towards the end of the nineteenth century and early twentieth. In Greece at the beginning of the twenty-first century, however, our problem is the creation of a privileged class of workers by a group of unions. These over-privileged workers, chiefly in the public sector and banking, work short hours, often making time for second jobs, and retire early, often in their fifties. In the process, they are stifling the rest of the economy. (Only last month the finance minister raised the proportion of tax banks must advance on the following year's taxes to 80 percent, in order to help pay a bloated public payroll). To boot, they try to form block votes in national elections, hijacking a democratic process in which citizens are meant to vote individually.

The government of Costas Karamanlis, to its credit, is living up to its electoral promises to reform the economy. It has already begun to distance itself from public sector companies by legislating, last year, to offer newly hired employees in listed public companies private sector contracts, not tenured positions. It also amalgamated the auxiliary pension schemes of banks in order to render their benefits less excessive and the funds viable.

Now it is preparing for the full privatisation of the banking sector, in which it will divest itself of the last remaining publicly-controlled banks, Emporiki and Agricultural, by allowing banks to free themselves from sectoral minimum wage and working hours agreements. These freedoms are not just important to the national economy; consumers demand them, too, fed up with being locked out of banks at 2.30pm.
The completion of banking privatisation will mean that the state will retain control of utilities and network industries - power, whose liberalisation is moving ahead slowly, OTE, which is grudgingly becoming more competitive, and transport companies such as Olympic, whose privatisation has proven a struggle. Beyond these, the national railway company, OSE, and urban transport may follow. But these are much trickier propositions since the viability of transport in the private sector in any economy in the world has never been decisively demonstrated. For the time being, there is both political and financial capital to be made from pulling the state out of a profitable industry.

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