The Eurozone Crisis, Collective Bargaining, Labour Market Reform and Austerity, 2010-2015

By the summer of 2010, the financial crisis initiated by overleveraged financial institutions had been transformed into a sovereign debt crisis. This was a deliberate tactic of ‘crisis management’ by neo-liberally minded European elites to protect their financial sectors. State intervention to the tune of billions of pounds and Euros recapitalized the banking sectors of Europe at the expense of the public finances propping up the European Social Model (ESM). Despite evidence to the contrary, the financial crisis was now being framed as the result of profligate governments. However, the governments of Ireland and Spain – two of the countries hardest hit by the financial crisis – had been running surpluses for years prior to the crisis. Even ‘profligate’ Greece was managing to bring its level of government spending more in line with core states like the Netherlands, and devoted a significantly smaller percentage of its GDP to public spending than countries like Sweden, which was not nearly as affected by the financial crisis.

The response at the European level was to reinforce the Eurozone’s commitment to austerity through the development of a new program of economic ‘governance’. The Treaty on Stability, Coordination and Governance (TSCG), announced in December 2011 and signed in March 2012, bolstered the previous constraints embedded in the Stability and Growth Pact by committing signatory governments to eliminating what economists have called the ‘structural deficit.’ While this is not the place to explore the mechanics of the structural deficit, critics have argued that the TSCG acts to further lock in constraints intended to keep governments on the path of austerity.

In regards to peripheral countries like Greece, the strategy of European elites has been to use the crisis as a means of transforming debtor economies into more competitive market performers. As the promised ‘convergence’ of the EMU has not materialized, structural adjustment policies have been formulated to radically transform labour and product markets, resulting in the weakening of organized labour vis-à-vis Greek and European capital. As mentioned above, Eurozone elites have been pushing an agenda of labour market ‘reform’ – a term referring to the liberalization of labour markets – since the 1990s. So too has the IMF. As early as 2000, the IMF, while lauding the reform efforts in Greece at the time, lamented the ‘poor performance of the [Greek] labor market’, emphasizing that while the reforms of the period were ‘welcome’, they ‘have not led to the hoped for turnaround, in particular for the segments most affected by very high unemployment rates (the young and women) and for the long-term unemployed (IMF 2000).’ In light of this poor performance, the IMF proposed, among other measures, ‘a reduction in the relatively severe firing restrictions and sometimes overly bureaucratic hiring regulations – which hamper employment chances especially for new market entrants’ (IMF 2000). In other words, according to the IMF, employment protection characteristic of ‘rigid’ Greek labour markets impeded economic growth and job creation.

In the early stages of the reform process, the Fund predictably noted that labour market reforms were crucial to ‘restoring competitiveness and boosting potential growth’. It also noted, however, that the primary challenges that the government would face in implementing its program was to be able to ‘overcome resistance from entrenched vested interests to opening-up of closed professions, deregulation, implementation of the services directive, and elimination of barriers to development of tourism and retail.’ By November 2010, the IMF re-iterated its call for Greece to make further progress on labour market and collective bargaining reforms in order to enhance ‘competitiveness, reinvigorate output, and increase employment’, noting that the reform movement had reached a ‘critical juncture’ and that, in order for Greece to be transformed into a ‘dynamic and export-driven economy…skillful design and political resolve’ would be required ‘to overcome entrenched interests.’ Almost five years later, in its April 2015 World Economic Outlook, the IMF continued to promote the line that increasing the flexibility of labor markets would ‘strengthen external competitiveness’ in the EU’s debtor economies, while strengthening investment and employment in the EU’s creditor economies. At the same time, however, the report indicated that ‘labor market regulation is not found to have statistically significant effects on total factor productivity’. This belated – and muted – recognition of non-correspondence between labour market flexibility and total factor productivity comes too little, too late however, as the process of radically transforming the relations between labour and capital are well underway.

A key ingredient in the liberalization of Greek labour markets, therefore, is a transformation of the institutions and practices of collective bargaining. In this regard, Greece is not exceptional, the attack on established institutions and practices of collective bargaining has occurred across the Eurozone throughout the period of the crisis. Greece is perhaps merely the most contested case of neoliberal transformation. The Eurozone crisis has thus affected Greek collective bargaining practices and institutions in a number of significant ways. First, the hierarchy of multi-level wage setting based on the favourability clause in 1867/1990 has been progressively undermined to increase the fragmentation of wage setting practices. As mentioned above, 1867/1990 stipulated that regional and firm level wage bargaining could not fall below the levels agreed to at the national and sectoral levels. Since the onset of the crisis, a process of ‘derogation’, in which firm level agreements increasingly diverge from sectoral standards, has taken place. Secondly, the power to determine the minimum wage has been taken away from the social partners and has become a matter of government legislation, rendering the social partnership increasingly meaningless. Thirdly, existing collective agreements have been subject to arbitrary legislative annulment – particularly as a means of enforcing public sector wage freezes. Fourthly, the extent of collective bargaining coverage has declined. Fifthly, the length of time in which an expired collective agreement remains in force has been reduced. And lastly, the rights of unions to collectively bargain at the firm level have been progressively weakened.

Collective Bargaining and Wage Setting

In terms of wage bargaining mechanisms, the process of undermining the nationally established ‘favourability clause’ through a process of ‘derogation’ has occurred through a number of progressive stages. As mentioned above, since 1990, Greek industrial relations were governed by multi-level collective wage bargaining in which firm and sectoral collective agreements could not deviate from the nationally established standards if the former resulted in a deterioration of the gains won by workers. On 17 December 2010, the PASOK government passed Law 3899/2010, an aspect of which brought in ‘special company collective agreements’ that sought to weaken nationally established labor standards under the rubric of increasing ‘competitiveness’ in order to preserve employment. Law 3899/2010 amended 1876/1990 by stipulating that, under special company collective agreements ‘remuneration and working conditions may deviate from the relevant sector collective agreement up to the level of the general national collective agreement.’ In other words, these kinds of firm level agreements could undercut the pay levels and conditions of employment found in sectoral and occupational collective agreements, but not those in the National collective agreements. As we will see below, however, the viability of National level collective agreements have been severely compromised by succeeding legislation, thereby exacerbating the extent to which these special firm level collective agreements drive down pay levels and working conditions across the country.

With this amendment, article 10 of 1876/1990, – the ‘favourability clause’ – as well as other articles referring to the scope of collective agreements ‘do not apply’ to special company collective agreements.’ This suspension of the favourability clause will be in place ‘until at least end-2015, [sic] in such a manner that firm-level agreements take precedence over sectoral and occupational agreements.’ The stated purpose of such ‘derogation’, the amendment states, is to enable firm level collective agreements to ‘take into account the necessity of improving firms’ adaptability to market conditions, with a view to create or preserve jobs and improve the firm’s competitiveness.’ The law also reaffirmed the non-binding nature of the Labour Inspectorate. In 2011, the government sought to assess the performance of the new special firm-level collective agreements and ensure that they ‘contribute to align wage developments with productivity developments at firm level, thereby promoting competitiveness and creating and preserving jobs.’

The politics of the crisis have also fundamentally undermined what existed of the social partnership. Since the 1950s, General National Collective Agreements (EGSEEs) have traditionally been negotiated between the national level peak associations of labour (GSEE) and capital (SEV and ESEE). One of the key areas of this bargaining process is the minimum wage. In November 2012, however, the coalition government of New Democracy-PASOK-DIMAR passed law 4093/2012 that granted to government the power of determining the minimum wage. At the beginning of 2013, the government reduced the monthly minimum wage by 22% (32% for those under 25 years of age) and either abolished or froze all allowances – such as marriage, education, children’s, etc. – that had previously been the basis of collective bargaining. As a result, the significance of the EGSEE has greatly deteriorated. While still serving – in principle – as the floor beneath which sectoral, occupational and enterprise level collective agreements cannot fall, the substance of the EGSEE has been significantly gutted due to legislative interference in the ability of the social partners to negotiate. In July 2013, a new EGSSE was agreed between most of the social partners (GSEE, GSEVEE, ESEE and SETE). SEV refused to sign the agreement, stating that the ESEE had no ‘legal foundation’ due to the current legislative changes and therefore did not provide any benefits to employees. This represents the first time that a national agreement has not incorporated the minimum wage; and never before has a national agreement had such limited content.

Trade Union Rights of Representation

On 25 October 2011, the PASOK government passed Law 4024/2011, introducing further amendments that undermine the rights of unions to represent workers in collective bargaining. First, the ‘special enterprise collective agreements’ were silently abolished, due to their limited uptake. Nikolopoulos and Patra suggest that one of the reasons for the failure of the special enterprise collective agreement was the costly and bureaucratic process of creating enterprise level trade unions – where none previously existed – in order to negotiate such agreements. The new law makes it easier for employers in firms employing less than fifty workers, where no unions are present, to enter into collective agreements with ‘associations of persons’, thereby allowing them to bypass unions altogether and undermine the principle of democratic, collective representation. Legislation from the 1980s (Law 1264/1982) enabled employers to conclude agreements with ‘associations of persons’, but only under certain conditions: they could be concluded only in the absence of a labour union; pertain to the resolution of a specific issue; and exist for a limited period of time. Law 4024/2011 significantly weakens the criteria that must be met in order to conclude these non-union based collective agreements. Most important, the law eliminated previous limits to the lifespan of such associations of persons, turning them into ‘nebulous non-elected’ entities that facilitate the ability of employers to drive down wages and benefits in an attempt to increase competitiveness through a reduction in labour costs – which is, of course, the intention of the structural reform process. Indeed, evidence suggests that small business has taken advantage of this new law in order to negotiate company level agreements with ‘less favourable provisions than those of the relevant sector agreement.’ One commentator has characterized Law 4024/2011 as ‘one more step toward the demolition of two of the most powerful pieces of legislation to be enacted in Greece since 1974: laws 1264/82 and 1876/90.’

Expansion and extension of Collective Agreements

Article 11 of 1876/1990 includes provisions for the joint ‘accession’ of workers and employers to pre-existing collective agreements that pertain to them. Sections 2 and 3 of the same article also contain provisions for the extension of the scope of collective agreements, determined by the Minister of Labour in consultation with the High Council of Labour, to include workers and employers in an entire sector or occupation regardless of whether or not they were unionized. In a communication to the IMF in the autumn of 2011, the government expressed ‘the possibility to extend sectoral agreements to those not represented in the negotiations will be suspended for a period until at least end-2014 [the duration of the Medium Term Financial Strategy].’ This power was simply repealed by law 4046/2012. Secondly, the duration in which the terms of a collective agreement remain in force upon expiration of the agreement have also been reduced. Under previous legislation, the terms of an expired agreement remained in force for six months; and even after the six month period, the conditions of work stipulated in the collective agreement continued to apply ‘until the termination or amendment of individual employment contracts.’ Law 4046/2012 reduces the extension period to three months, and the continuation of the conditions of work after the expiration of the three month period does not include all work conditions, but only a portion of the salary.

Labour Market Flexibility

On 11 May 2010, the government passed Law 3846/2010. This act legalized new ‘flexible’ labour arrangements, such as part-time work, telework, and the use of temporary employment agencies. Much of this falls outside the purview of collective bargaining and furthers the development of ‘precariousness’ and was intended to reduce unemployment under the neoliberal belief that unemployment is the result of labour market ‘rigidities’. Law 3899/2010, passed in December 2010, contains measures that significantly increase the power of employers over workers, thereby magnifying the problems of precariousness in the Greek economy. The bill extends probationary periods from 2 to 12 months, increasing the amount of time in which workers can be arbitrarily dismissed without compensation; it extends the duration of temporary contract work from 18 to 36 months, thereby reducing the incentives for employers to hire workers on a permanent basis; and the bill lengthens the period of time in which the employer possesses unilateral power over labour time flexibility from six to nine months.

Law 3863/2010, passed on 15 July 2010, weakens the restrictions of collective dismissals, making it easier for employers to lay off workers. Previous legislation allowed employers to dismiss up to 4 workers per month in firms employing between 20 and 200 workers (and up to 2 per cent of the workforce for larger firms). The new law raises the threshold to 6 for firms employing between 20 and 150 employees, and 5 per cent of the workforce for firms employing more than 150 workers. It also shortens the duration of the layoff notification period and reduces the amount of severance pay for laid off workers. The special company collective agreements legalized by 3899/2010 in December 2010 also increased the power of employers over workers in terms of their control over the working time – an issue that, as we have seen, was a contentious issue during the reform processes of the early 2000s. The special firm-level collective agreement ‘may regulate the number of employment positions, the conditions of part-time work, shift part-time work, suspension of work, and any other terms of implementation including its duration term.’ The outcome of these legislative changes has been a significant increase in precarious forms of work without a corresponding decline in unemployment.

The State of Collective Bargaining in Greece

All of these changes have had a severe impact on collective bargaining in Greece. In 2014, the Greek centre-right newspaper Kathemerini ran a short article titled ‘Collective labor contracts a thing of the past.’ The article pointed out that, at the time, only 11 collective agreements – meaning national, sectoral and occupation collective agreements – were in effect representing between 7 to 10 per cent of the private sector workforce, compared to 161, covering almost all of Greek private sector workers in 2008. Those collective agreements that do remain in force,

‘foresee significant reductions to salaries, to say nothing of any bonuses or special salaries that used to be the norm in the past. Furthermore these protected salaries do not concern all employees in the sector they relate to, but only members of the unions represented in the signing of the collective labor agreement, which further reduces its power.’

In contrast to this, the number of firm level collective agreements has significantly increased since 2012. According to Eurofound, 976 business level Collective Employment Agreements were signed in 2012, compared to 179 in 2011 and 238 in 2010. This represents a 75.6% increase in firm level agreements between 2010 and 2012.

The decline of sectoral and occupational collective agreements, the disempowerment of trade unions as the representatives of workers, the abolition of the favourability clause, the amendment of the extension of collective agreements to non-unionized workers and the limiting of the duration of expired collective agreements has put significant downward pressure on the levels of remuneration and the working conditions of workers. Data collected by the Eurofound corroborates the bleak picture of labour relations in crisis ridden Greece. A 2013 report has indicated that the agreements signed since 2012

‘were mainly signed following the termination by the employers of the previous collective agreements and contained provisions that were more disadvantageous for workers as regards wages and employment conditions (especially in relation to working time).’

Law 4046/2012, passed in February 2012 by the technocratic government of Lucas Papademos and often referred to as Memorandum Two, has, in the words of one report, altered ‘the system of industrial relations, as legislation replaces the will of the parties involved.’

The Conditions of Workers

As a result of the above mentioned developments – the transformation of collective wage bargaining, the weakening of trade union representation, the reduction in collective bargaining and the increasing flexibility of the labour market – Greek workers have been experiencing a dramatic deterioration in their living standards. Since the onset of austerity, labor costs have declined dramatically, largely as a result of declining wages (indicated by the dramatic decline in the minimum wage) and the abolition or freezing of non-wage benefits and allowances. Between 2009 and 2014, average wages from declined from US$32636 to US$26436, a drop of 19 per cent. Trade union density has declined. Unemployment has climbed 20 per cent since 2008, hovering between 26 and 27 per cent of the workforce and shows no signs of declining, despite the neoliberal faith in job creating flexible labour markets. Between 2009 and 2012, the poverty rate rose 0.133 to 0.151, an increase significantly higher than other crisis impacted countries such as Spain, Portugal and Ireland. Income inequality has risen significantly – after a dramatic reduction between 2004 and 2008 – from a gini coefficient of 0.330 in 2008 to 0.340 in 2012. Again, this places Greece ahead of Spain, Portugal and Ireland in terms of income inequality. Annual hours worked spiked between 2010-2011 after a significant decline between 2006 and 2010. In 2013, Greek workers worked an annual average of 2060 hours, compared to 1362 by German workers.


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