Tuesday, 6 November 2012

Austerity Bill Brings Changes to State, Pensions, Economy

Greece is pledging to cut billions of euro from public spending over two years in a massive austerity bill tabled in parliament late on Monday night. It goes to the vote at midnight on Wednesday, in what may be a close contest. Should Greece fail to approve the measures, it would not claim a 31.5 billion euro bailout  instalment and run out of money to pay state salaries and creditors before the end of the year.

One coalition partner, Democratic Left, has said its 16 MPs will not vote in favour of the measures. Three MPs from another partner, the socialist Pasok, have said they are against the measures. That could leave the government with a majority of just 157 votes in the 300 seat parliament, down from its nominal bloc of 176. Meanwhile unionists and opposition parties are trying to shake those crucial seven seats out of the government camp.

Thousands of communist party supporters flocked to Syntagma Square before parliament on Tuesday morning to protest against the move. "Worker, you can manage without bosses," they chanted. "Not a cog turns without you." Many of those at the rally repeated the party line, that Greece should depart both the eurozone and the European Union, and refashion its economy to give proceeds to workers

The protests were accompanied by a two-day general strike that brought Athens' public transport to a standstill. Schools shut down, hospitals operated on skeleton staff, and rail services across the country were cancelled. Athens International Airport shut down for three hours, causing 65 flights to be cancelled or rescheduled. The Public Power Corporation shut down five power plants. In the private sector, banks and retail shops rolled down their shutters.

Holy cows

This round of austerity is different from previous ones in three ways – it is by far the largest, it touches corners of the public service previously considered sacred and it pays attention to jobs and growth as well as cuts.

The conservative-led government is doing things that were unthinkable a few years ago. In the cost-cutting department, it attacks two holy cows of Greek politics - pensions and the public sector payroll. 

It is raising the retirement age from 65 to 67 in the public and private sectors, axing holiday bonuses for retirees and cutting pensions by five to fifteen percent. It will also curtail one-off bonuses upon retirement by anything between two and 83 percent. Such golden handshakes tend to run into the tens of thousands of euro. 

Perhaps most satisfyingly to opponents of austerity, the bills abolishes pensions for new members of parliament, and raises the retirement age for past members to 67. Under the old regime, MPs were entitled to a pension after a single term, which ran concurrently with their professional pension. 

In the public sector the bill would also shed 110,000 state workers over five years, and readjust the salaries of those who remain, from the civil service, to the judiciary to the university system. Certain payrolls previously spared are now brought into the abattoir, such as the staff of the president and the parliament. Special payrolls, those of the military, the police, the coastguard, the diplomatic corps and the intelligence service are also cut for the first time.

The bill would also make it easier to dismiss, discipline, transfer and retrain state workers. Unlike previous reforms, which allowed the government to make new hires under private sector terms, this one would allow it to convert tenured positions to private sector-style contracts as well.

Local government salaries would by slashed by half, and many positions, such as municipal council seats and committee seats, are to go unpaid. Municipalities that run chronic deficits are to be forced to pay the state the proceeds of a local property tax in return for a bailout.

Finance Minister Yannis Stournaras, defending the bill in committee today, said it was "an attempt to dispel a series of obstacles that were legislated to favour particular, privileged income groups, keeping dozens of professional opportunities hermetically sealed to young workers, scientists, professionals and businesspeople."  

Radical left opposition party Syriza says the measures, a mixture of spending cuts and new taxes, are worth 18.9 billion euro ($25bn), much higher than the 13.5bn ($17bn) originally expected. 

The two sets of measures should reduce state expenditures by 4.5bn euro next year alone. 

The Economy 

When they came to power last June, the conservatives said that they wanted to emphasise growth and jobs alongside fiscal discipline. Cost cuts alone, they said, were driving Greece deeper into recession. 

Accordingly this bill contains provisions that build on previous attempts at liberalisation, particularly in tourism, where Greece owes an estimated one fifth of its economy. Some seem arcane by the standards of a Western economy. For instance, the bill would allow hotels to operate airport courtesy shuttles for the first time. It would also allow car rental companies to sell day-long rentals with drivers, opening up the touring market to them. Both moves are at the expense of professional taxi drivers, who have also tried to prevent the government from allowing unlimited taxi licenses. 

Also in the tourism sector, the law also would lower the bar into the site guide profession by mandating a two-month training period in any tertiary institution, rather than a two-and-a-half year degree programme at a Greek state university. "Anyone will be able to come over and be a guide on the basis of a flimsy education," complained one union member. 

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