Friday, 1 August 2008

The socialist party needs to outgrow the union movement

The opposition has flown into a frenzy of well-worn phrases about how the social state is being eroded and social dialogue abandoned. The cause is Finance Minister George Alogoskoufis' amendment passed in parliament last week, which makes it harder for state workers in loss-making concerns to get annual raises.

Until now, public employees could be confident of an annual raise in collective bargaining agreements because if they couldn't agree with management they could call in a board of arbitration. The board traditionally split the difference between the two sides, meaning that half of an outrageous claim could conceivably be met.

No longer. Management must now approve an appeal to arbitration, leaving workers with strikes as their only resort.

Otherwise reasonable people and unionists have called on the government to rethink. Loukas Apostolidis, a cultivated diplomat and former intelligence chief, says Alogoskoufis is trampling on human dignity. Kostas Poupakis, New Democracy's top unionist, told Alogoskoufis to take the amendment back. Yannis Manolis, a former unionist who fancies himself the conscience of the conservatives, wondered why his party had to be the one to admit defeat in keeping up the rate of deficit spending Greeks have come to expect.

New Democracy may have proven themselves at least as corrupt as their predecessors - and on that score budget savings are unlikely until the next election - but the party has made a sincere effort to sew up the holes in state-controlled companies.

Its first law affecting state enterprises (DEKOs) was passed in December 2005. It obliged management to follow international financial reporting standards and create three-year business plans; and it obliged new hires to come in without tenure.

The first measure would suggest preparation for privatisation, or at least private sector-style management, but the last measure laid the foundation only for generational change. It will be at least two decades before DEKOs look attractive enough to investors if they slim their payrolls by attrition.

The enterprising CEO of the Hellenic Telecommunications Organisation (OTE), retired investment banker Panagis Vourloumis, sped things along. He embarked in 2006 on a voluntary redundancy scheme that enabled him to shed 700 workers. The cost was high - 913 million euros - because Vourloumis offered veterans the entire balance of what they would be paid until retirement to retire immediately. The scheme was so successful - OTE boosted its shareholder value over the following two years - that it may be repeated for a further 650.

Although voluntary retirement schemes have not been announced for other DEKOs, they have at least been proven a viable option. Alogoskoufis is suggesting nothing so radical for the 25 DEKOs that collectively cost the taxpayer 1.5 billion euros last year - about 6.5 percent of GDP. He merely wants to make it harder for collective bargaining agreements with labour to raise that cost every year by a fixed percentage at the stroke of a pen.

The unspoken message is clear: the economy will never right itself without savings. Alogoskoufis has already tried everything else - he has lowered personal and corporate tax as a stimulant for new businesses and more taxpayers on payroll; he has revised the debt he inherited upward, which gave him a more unfavourable starting post to measure his progress against; then he revised GDP upward, which lowered deficit and debt figures by proportion; in a pinch, he raised VAT to make good a revenue shortfall. Despite all, the deficit - forecast for a new low of 1.6 percent of GDP this year - will now likely be closer to three percent.

Those three percentage points are dwarfed by the amount we will pay this year to bail out the payroll of workers hired by Pasok. But our children will pay that with interest, and therein lies the criminality of opposing as reasonable a measure as that which Alogoskoufis carried through parliament last week.

Almost all the DEKO debt is caused by companies in the transport sector - of this year's estimated 1.6bn euro bill, the Hellenic Railways Organisation is already responsible for an estimated 878mn, and Athens' public transport network at least a further half million. Olympic Airlines and Olympic Airways will incur an undisclosed amount of damage.

If the value of city transport networks can include the fact that cities are simply not viable without them, and neither, therefore, are urban economies, they can be seen as parts of a worthwhile whole; carbon emissions savings should be rightly taken into account, too, and there is now a financial mechanism through which to do so.

Yet even if we consider subsidised buses, trolleys, metropolitan rail and trams - areas where private sector competition would certainly drive fares up - a socialist base on which capitalism may thrive, we must surely penalise long-distance transport for behaving in the same way. Intercity and international trips are not a daily necessity, and these markets are served by a viable private sector.

The political priorities that drive parties in power are destructive to the ends of efficiency and accountability that must drive corporations. Politics is an essentially humane practice, and business essentially inhumane. The tug of war between the two is the healthy state of affairs; when the public and private sectors buy each other out, the game becomes rigged to the long-term detriment of both.

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