Saturday, 19 September 2009

The Greek election: Judging the parties on the issues

Half-way through the election campaign sparked on September 2, the socialist opposition appears in opinion polls not only as the probable winner, but in some scenarios even manages enough MPs to form a government. Pasok had a six-point lead even after Prime Minister Kostas Karamanlis announced ruling New Democracy's policy platform on September 5. That lead may have broadened after Pasok leader Yiorgos Papandreou announced his party platform on September 12. By some reckonings Papandreou may even win single-party sovereignty in the first round.

Pasok and New Democracy platforms compared

New Democracy and Pasok have both made some sweeping and, in a few cases, radical proposals.

Both are broadly in favour of greater transparency and accountability in the public sector. Both want to bring the public debt under control by striking at tax dodgers and through better economic planning (three-year rather than one-year budgets). Both want to increase economic competitiveness, for instance by making it easier to set up a company. Both want to give secondary school students free laptops.

The similarities are telling because they reveal how much more, well, conservative, the conservative party is. Prime Minister Kostas Karamanlis would give a free laptop to every 13-year-old; Pasok leader Yiorgos Papandreou says he would give one to every high school and university student. Karamanlis would refocus the budget to areas of long-term return such as research, education and green energy; Papandreou vows to bring education spending to five percent of GDP from day one, up from today's roughly 3.6 percent, and throw in another billion for good measure. And he would completely re-orient energy production away from oil and lignite and around renewables in which Greece is abundant. Karamanlis would open up a few 'critical' closed professions; Papandreou would abolish the institution altogether. Karamanlis talks vaguely about greater accountability; Papandreou would electronically publish every document signed by a member of his cabinet.

Papandreou's platform is by far the more visionary, and it captures the wholesale nature of the changes Greece is in need of. Where New Democracy clings to incremental, conventional or even generational change, Pasok understands the need for a clean break (see the detailed comparison of the platforms below).

But the socialist platform also contains some dangerous pandering. For instance, it is unrealistic for Papandreou to suggest that he could viably raise public sector salaries above inflation. The public sector does not need to be made more attractive but less so. Karamanlis' hiring and wage freeze for one year are not only closer to the mark; they are provisions Papandreou would be under similar pressure from the European Commission to adopt.

The ability to raise money without putting the country deeper into debt is also an open question for Papandreou. Asked how he would finance his programme, Papandreou spoke about taxing the rich and curtailing waste. There is indeed great potential in waste-cutting measures in the Greek economy for whoever has the courage to take on the political cost. But Papandreou's tax on stock dividends, large inheritances and large estates, while good, old-fashioned socialist politics, would in all likelihood profit the state little. The rich in Greece are very few and are well-practised, since the days of Papandreou's father, Andreas, in spiriting their fortunes to places like Switzerland.

Pasok's populism is at its height on privatisation. It seems highly unwise for Papandreou to suggest that he would partly re-nationalise Olympic Airways and the Hellenic Telecommunications Organisation (OTE) – New Democracy's only privatisation achievements. Not only does that pledge smack of 1980s socialism; it would undermine Greece's credibility in future privatisation attempts.

If Papandreou seems torn between reform and populism, Karamanlis is flatly unconvincing. Asked what he would do differently if he were back in 2004, Karamanlis said on September 6 that he would be less tolerant of dialogue and more forceful a reformer. He used education as an example. Unions and opposition parties walked out of talks in 2006, and then fought the conservative bill. Karamanlis suggested that he would be less easily intimidated.

Yet his second stab at education reform after the 2007 election produced far less progress than his first. Talks with the secondary school union, OLME, were more timid than talks with the higher education union had been. No legislation was even drafted, let alone fought over. That sad truth alone undermines Karamanlis' claim to be an emboldened reformer.

Most of all, Karamanlis has lost his claim to a vision of the future. Both at last year's Thessaloniki International Fair and this year's, Papandreou expressed the larger truth about what ails Greek public life, while Karamanlis rattled off shopping lists.

Meritocracy, accountability and transparency are indeed the values in greatest need of reinforcement. Investing in quality education and the environment should indeed be top priorities along with paying down the national debt. After years of wasting his time attacking Karamanlis, Papandreou is finally expressing these truths in their correct proportion, while Karamanlis merely acknowledges them with the enthusiasm of a ticket inspector.

Is Pasok's platform implementable?

Papandreou laudably says he will make it possible to open a company very fast – possibly within a day. But similar things were said during New Democracy's first full year in power. Then-development minister Dimitris Sioufas declared 2005 a “Year of Competitiveness”, and presented a bill to cut the number of documents required to set up a new business from 20 to eight. Yet this year Karamanlis promised to slash them from 18 to four. Clearly, something went wrong.

Similarly, then-finance minister Yiorgos Alogoskoufis had asked the European Commission until the end of 2006 to bring the deficit to three percent of GDP. He managed it, but only for one year out of his five, and some economists have their suspicions about whether this was done by hiding costs.

Papandreou's main qualitative difference with Karamanlis is in his more radical statements – the sort that cannot be made by an incumbent who has lost his sense of novelty or challenge. Strikingly, he told journalists on September 13 that “today the media are not free. A journalist is not always free to write what he believes. Why? Because there is an economic interdependence between the media and the state, politicians and private interests... We want a clean relationship, clear rules, so that we can have truly free journalism.”

That is perhaps the most candid statement to be made by a politician on the objectivity of major Greek media outlets. But once again, an incoming administration's desire for fair treatment is not without precedent. New Democracy found the daily press stacked up against it in 2005, so it forced the daily press union, ESIEA, to publish a list of journalists put on public payrolls by the outgoing Pasok. It also passed a new press law obliging individuals with a five percent share or more in a media company to withdraw from any public contracts. The European Union struck down the latter citing market freedom, while the notorious list named, but did not shame, journalists.

It is too early to say whether Papandreou will likely succeed in most of what he hopes to do. For one thing, we do not yet know who will comprise his cabinet. But New Democracy's experience of frustrated reform ought to teach Pasok one thing: the best way to overcome the vested interests of organised labour, organised capital and the parties themselves is simply to ignore them. To engage them in endless dialogue is to compromise with them fatally. Karamanlis' consensual approach failed, partly because no-one wanted to sanction legislation they did not ultimately control. It is time for a party to have the courage to wield its majority to perform what Karamanlis used to pejoratively term “electroshock”.

This weblog is being listed on the Australian diaspora newspaper Neos Cosmos.

The platforms in detail

Taming the national debt

New Democracy:
-Public sector hiring freeze for 2010 and only one new hire for every 2 departures for two years thereafter. (The freeze was originally announced in February, while the rate of attrition was legislated by Pasok in the early 1990s – the so-called Peponis law - but remains unimplemented).
-Public sector wage freeze in 2010, and inflation-tied raises thereafter for some years. (The freeze was originally announced in March. Like the hiring freeze it came under pressure from the European Commission).
-No new benefits for two years, no alterations to existing benefits.
-30 percent reduction in overtime for two years.
-30 percent reduction in travel expenses.
-Pay cut for ministers, MPs, prefects and mayors.
-A set of criteria will be put in place to gauge the necessity of all spending proposals
-Three-year budgets.
-Spending guidelines and limits according to category. (This was proposed by the OECD and adopted by ND).
-Oversight of local government spending and pension funds.
-Reduction of losses at the Hellenic Railways Organisation (OSE).
-Long-term leases of public land that now lies fallow to raise money.

-Will propose to the European Commission a three-year grace period to revive the economy and bring the deficit under control.
-Will submit a three-year budget to parliament along with the Stability & Growth Plan. (Three-year financial perspectives were recommended by the OECD and adopted by both Pasok and New Democracy in their 2009 platforms).
-Fight waste and tax evasion.
-Tighten oversight of spending in all public bodies.
-Review all defence procurements under New Democracy. (This smacks of reciprocity. The conservatives scrutinised Pasok's arms purchases in a parliamentary committee of inquiry after they came to power in 2004).


New Democracy:
-Electronic cross-referencing of social security with tax records to avoid social security payment or tax evasion by employers and self-employed.
-Combine collection mechanisms for tax and social security contributions. (Both these proposals stem from the OECD package of proposed reforms).
-A new blacklist to be created for bad debtors to the state, who will be barred from business with the public sector.
-All computerised accounting systems and cash registers to be connected online with the finance ministry, so auditors can check for invoices for non-existent transactions and clamp down on VAT fraud.
-All companies to file taxes electronically.
-Living standards to be used to assess veracity of income declarations.
-The low flat tax on certain forms of income (such as athletes' income and public hospital doctors' overtime) to be abolished. All personal income tax to be assessed on a sliding scale.

-Raises for public sector salaries and pensions beyond inflation.
-The sliding tax scale will be recalibrated to be fairer.
-More VAT returned to farmers. (Unlike businesses, which receive all VAT they have paid back at the end of the year, farmers receive only a percentage of the VAT they pay when they sell their produce to wholesalers. Pasok proposes to raise that percentage.)
-An emergency handout to the poor.
-Stock dividends to be taxed as part of income.
-Corporate tax remains as is, but tax deductible items will go; all monies re-invested in the business to enjoy a lower tax rate.
-Flat real estate tax (ETAK) to be replaced by scale that taxes large estates more heavily. The church will not be exempt.
-Inheritance tax to be brought back but with a higher threshold so as not to penalise working and middle class earners.
-De-politicisation of tax collectors and restructuring of tax bodies.
-Consistent tax regime, without constant surprises.
-Selective random audits.
-Return of Point System. (Pasok introduced a system of accruing penalties for tax evasion in 2003. It was abolished by New Democracy when it came to power the following year, so its success as a deterrent was never really assessed).
-An end to artificially low profits from subsidiaries of multinationals, and monitoring of intra-corporate transactions. (Pasok wants to stop multinationals from siphoning profits from their Greek subsidiaries and expatriating them).
-Closer oversight of offshore real estate concerns.

Competitiveness & Entrepreneurship

New Democracy:
-'Critical' closed professions to be opened up.
-End cabotage in cruise shipping. (Greek cruise shipping has managed to delay open competition from European Union rivals by protecting the exclusive right of Greek-flagged ships to use Peiraieus as a turnaround port – for the beginning and end of a trip. Norweigian cruise vessels, for example, must end or begin their cruise in another port. This protection, called cabotage, was supposed to have been abolished in the early 1990s).
-14-18 steps to set up a company reduced to four. (New Democracy promised something similar in 2004, but failed to deliver).
-Temporary, local and sector-specific derogations from wage agreements. (Salaries in Greece are not free-floating. Employers and unions agree on annual raises by profession. Some smaller employers say they cannot afford to abide by such wage agreements. New Democracy proposes to allow limited and temporary derogations).

-The Competition Committee is to actually do its job of cartel-busting. (The committee is understaffed and underfunded, according to the IMF. It was also at the heart of a scandal in October 2005, in which its chairman apparently solicited a bribe to relieve a dairy cartel of a heavy fine).
-A new service is to survey the market for monopolies.
-Property auctions to be replaced by new repayment schemes for those who can prove they cannot repay loans, to prevent repossessions.
-Utility rates to freeze for a year.
-Companies in trouble due to the crisis to have their debts frozen for a year and possibly refinanced.
-15 billion euros to be diverted from the 28bn euro bank rescue package to create loans for small and medium-sized enterprises.
-Criteria for being blacklisted as a debtor on Teiresias (the inter-bank bad debtor database) to change so as not to penalise entrepreneurs.
-A new refinancing fund to provide liquidity to the market.
-Time limits for post-dated cheques to become incrementally shorter. (Greece has billions of euros' worth of post-dated cheques being traded as currency, often several times. They are written against future earnings which sometimes fail to materialise, and the final holder of the cheque may spend years in court trying to get paid).
-Setting up a company in a day by doing all the bureaucracy in one place – a one-stop shop – to be made possible.
-Strong financial sector oversight.
-Abolition of closed professions.

Development, Privatisation & Liberalisation

New Democracy:
-Refocusing of the budget on productive areas – education, research, green energy, infrastructure.
-Privatisation of Mount Parnes Casino, Ellinikes Alykes, Thessaloniki Water & Sewerage Company (EYATh), Larko.
-Public Gas Corporation (DEPA) privatisation options to be considered.
-Obligatory retraining for some unemployed as a condition of benefits.
-No unemployment benefits for anyone who turns down two jobs.
-Approximately 1,000 municipalities to be consolidated into 350.
-Promotion of decentralisation by strengthening regions.
-Fewer public bodies.

-New energy development plan to be submitted to the European Union by end-2009 based on renewables. (Pasok is making renewable energy a cornerstone of its economic revival policy. New Democracy, in contrast, delayed open market rules for independent power generators by a year when it came to power, and watered them down. The Public Power Corporation has made no significant investments in renewable energy in the past six years).
-Renewable energy technologies to be manufactured in Greece. (Pasok wants such materials as solar panels made in Greece).
-Recycling industry and green building code to become core green development drivers.
-Farming and tourism to focus on high-value & quality over mass production.
-Reforestation of all that was destroyed in 2007.
-The state is to re-acquire a stake in the privatised Olympic Airways.
-The state to acquire a voice on the board of the privatised Hellenic Telecommunications Organisation (OTE).

Transparency, Accountability & Meritocracy

New Democracy:
-A centralised payroll for the entire public sector as of January 1. (An OECD proposal).
-A new payroll for new entrants into public sector, to ensure their payscale fits their qualifications and experience.
-Faster costing of proposed programmes.
-Detailed annual accounts to be submitted by all public bodies.

-Statistical service to be overhauled to “tell the truth”.
-The subjects of disciplinary hearings in the civil service are to present themselves to panels made up of people from a different part of the service.
-All public acts of ministers and local government to be available online.
-Undeclared property to be seized.
-Large electoral districts to be broken up to lower the cost of campaigning and thus the temptation to undeclared campaign finance.
-All sources of finance of politicians and parties to be declared.


New Democracy: See Taming the national debt

-Labour Inspectorate staff to be increased so as to enforce rules on overtime, vacation and pay scales.
-Unemployment benefit to rise incrementally to 70 percent of salary.
-Revision of rules governing rented labour (eg. cleaning services).
-State-backed loans to go to companies that use the money to increase or maintain their payroll, not to speculate.
-State to subsidise the social security co-payments of young employees to beat high unemployment in the 18-24 age group.
-Social work to be provided for the chronically unemployed or older unemployed.


New Democracy:
-A free computer for every 13 year old student.
-New method of university entrance. (New Democracy got to work on reforming secondary education after the 2007 election, including an alternative method of university entrance than the detested Panhellenic exams. But it did not produce a concrete proposal).
-Changes to university asylum and to protest march rules, so that minorities cannot shut down the city centre or use campuses as bases of criminal operations. (The National Council for Education, set up by New Democracy, put these measures among its original 2005 proposals but the government shied away from legislating them at the time).

-Spending to be on a par with the OECD average of five percent of GDP from the 2010 budget, and a billion euros on top of that for good measure. (Current spending is about 3.6 percent of GDP).
-Everyone enrolled in a public school or university to receive a free laptop and free unlimited internet access.
(Note: Though he breathed fire against New Democracy's attempts to de-politicise university campuses and recognise non-state higher education, Papandreou says absolutely nothing about education reform in his party's platform. Does he really mean to be a reformer in all but education?)

Social Security & Healthcare

New Democracy:
-Reduction in professions characterised as Heavy and Unsanitary for social security purposes, but only for new entrants.
-Stricter rules on awarding pensions for the handicapped.
-Foundation for Social Insurance (IKA) to separate health and pension plans.
-Computerisation of national health system to keep track of material inflows and outflows and prevent theft or overcharging.
-Complete implementation of a new procurement system.
-A new system for low urgency medical services to decongest hospitals. (This sounds similar to Pasok's family doctor scheme – see below).

-All staff shortages in doctors and nursing staff to be made up.
-Electronic file for every patient.
-Family Medical Units to be set up so families can have round-the-clock free healthcare.
-By end-2010 all pensions will be no more than 3 months in arrears (compared to 1 or 2 years).
-The four biggest social security funds – IKA, OAEE, OPAD & OGA – will bid for medical procurements jointly so as to get better prices.
-A basic national pension, and separation of health maintenance from pensions in each fund to better monitor financing to be discussed.
-The National Solidarity Fund to ensure viability of the system for future generations. (This fund was set up by New Democracy's 2008 pension reform, as a way of setting aside a ready pool of money to rescue the system from future insolvencies).


  1. Great article John!

    I'd say Pasok's plan is more ambitious and far-reaching that ND's, but it can afford to be as they have the benefit of not having to try to promise on what they haven't delivered on in the last 6 years.

    Where it really comes unstuck is what appears to be buying votes, and the old favourites of raising money through 'cutting waste'. For example, paying the public sector more. Why? If anything, the public sector could be easily be halved with no apparent loss of 'service'. Here, ND's plan is stronger with a hiring freeze and 2 for 1 hiring policy. Similarly, why give children and university students laptops? Surely, primary investment should be going into improving the underlying education system first, books, buildings, teaching standards, etc. then give away laptops only to the most socially disadvantaged children.

    Were I able to vote (if Greece bettered it's policy towards citizenship) I'm still pretty undecided.....


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