Neoliberalism and De-democratization in Greece

Public discourse of neoliberalism often fails to appreciate the extent to which it entails not a simple process of de-regulation, but rather, a process of pro-market re-regulation. In many cases, constraints are removed from the organizational capacities of capital while more constraints are imposed upon organized labour. For example, the neoliberal era has witnessed increasing state intervention in collective bargaining as well as the increasing administrative capacity to police the rights of property. In this sense, liberalization is not so much a removal of the state from the economic sphere, but rather, a re-oreintation of the coercive nature of the state, away from earlier post-war attempts to dictate to capital, and more towards the capacity to discipline the working population. In this way, structural reforms affect the balance of power between capital and labour, influence the degree of conflict between them, and impacts on the outcome of those struggles.

In the mainstream academic literature, it is often presumed that the failure of neoliberal reform is a result of an organizational inability on the part of capital and labour to align their interests in ways that create “institutional complementarities”. The upshot is that if the right institutional fix can be found, then reform coalitions can be established in order to further the process of neoliberalization. This, however, obscures the antagonistic character of the politics of neoliberalism – a politics that is rooted in the structural reconfiguration of processes of capital accumulation and the shifting nature of class interests in contemporary capitalism, as well as the shift in the balance of class forces discussed above.  Furthermore, it obscures the intrinsically anti-democratic aspects of neoliberalization.  Many critics of neoliberalism have argued that the successful implementation of the neoliberal reform project depends upon the exercise of strong, executive power – rather than the weakening of executive power extolled by the defenders of laissez faire – in the face of popular opposition. Even such a proponent of neoliberalism as Hayek argued in favour of a post-sovereign state in which the market order was protected by the rule of law from the democratic tendencies of popular sovereignty. There is thus a tendency towards “de-democratization” under neoliberalism, in which the reform process itself entails the insulation of economic policy making from influence by popular forces outside the sphere of the neoliberal elite. Under conditions of crisis, the strengthening of executive power at the expense of democratic forms of representation may be encouraged for the sake of furthering the neoliberal transformation of peripheral economies. And in light of the power relations involved in structural reforms, this may serve to intensify political conflict associated with market colonization. Indeed, as we will see below, it appears that the continued neoliberal transformation of the Greek economy is occurring in tandem with processes of de-democratization.

The tendency of neoliberal de-democratization has become more apparent with the onset of the global financial crisis.  More than in any other country in Southern Europe, the Eurozone crisis has transformed into a full-blown political crisis of the Greek state. This is a result of the ways in which austerity – both in terms of the substantive policy outcomes as well as the process of policy-making and implementation – has undermined the capacity of Greek producer groups (labour and capital) to re-establish a productive social dialogue, even in the event that their interests should temporarily align. The suspension of sectoral collective bargaining and the neutering of the social partnership (e.g., by removing the minimum wage from the jurisdiction of the national collective agreement) has done this much. At the same time, attempts to move towards a more consensual political process that may open up political space for autonomous coordination or greater democratization have been resisted by opposition parties.  Recently, the Syriza government attempted to introduce constitutional reforms that would replace the existing system of reinforced proportional representation with a pure form of proportional representation, but failed to achieve the parliamentary super-majority needed to introduce the new system for the next election. As a result, the new system will be introduced after the next election. Whether these reforms diminish the majoritarian nature of the political system, therefore, will not be determined for some time.  In the short term, however, the tendency has been that of “de-democratization” in order to facilitate neoliberalization. And the more intensive the neoliberal reforms, the more de-democratized the Greek system becomes. Some instances of de-democratization in Greece include:

Attacks on Collecitve Bargaining and Organized Labour: The Eurozone crisis has 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 Law 1867/1990 – stipulating that firm level wage bargaining cannot fall below the levels agreed to at the national and sectoral levels – has been progressively undermined, thereby increasing the fragmentation of wage setting practices. 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.

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. A 2013 Eurofound report indicates that 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).” As a result of these reforms, Greece has experienced the greatest decline in collective bargaining coverage of any OECD country. OECD data indicates that collective bargaining coverage in Greece has declined to just over 40% of the workforce in 2013, down from just over 80% in 2008 prior to the imposition of austerity measures (OECD 2016). This represents the greatest decline in collective bargaining coverage in the OECD over this period of time.

Technocracy and the Decline of Popular Sovereignty: In the face of the first significant challenge to governmental authority by organized labour in autumn 2011, the government of Papandreou stepped down and oversaw the transition to a partially technocratic caretaker government lead by Lucas Papademos, the former governor of the Greek central bank. Under Papademos, who was brought in from outside parliament (and thus, was not elected), a cross party cabinet was formed, comprising PASOK and New Democracy MPs. Rather than signifying an attempt to establish a new kind of consensus politics, however, the creation of the technocratic government represented a means by which to shield pro-austerity politicians from opposition within and outside of parliament. The second memorandum, which introduced significant changes to collective bargaining institutions, was implemented by this government in February 2012.

The technocratic government mentioned above was created in the aftermath of an aborted referendum initiated by Papandreou as a means of legitimizing austerity. The prospect of a popular rejection of austerity by the Greek people was enough to lead German Chancellor Angela Merkel and French President Nicolas Sarkozy to summon Papandreou to the G-8 Summit in Cannes in the fall of 2011 where they proceeded to instruct him to turn the referendum into a referendum on Greek membership in the Eurozone. Papandreou subsequently withdrew the referendum and announced his resignation, precipitating the creation of the technocratic government. Electoral democracy is not considered to be a viable means of breaking from the neoliberal consensus of the EU’s elite; upon resuming negotiations with the Troika after their election in January 2015, the bargaining team from the anti-austerity Syriza government were told by German Finance Minister Wolfgang Schauble that “Elections change nothing. There are rules (” After six months of contentious and failed negotiations, the Syriza government held a snap referendum on austerity in July 2015. The unequivocal rejection of austerity by Greek voters (62% of whom voted “No” to continued austerity) only served to harden the Troika’s resolve to impose stringent austerity measures on the new left-wing government. Under financial pressure from the EU (the ECB cut off liquidity from Greek banks in the run-up the referendum), the Syriza government subsequently capitulated to the demands of the Troika.

The Decline of Parliamentary Sovereignty: The conditions of the bailout agreed to after the July referendum stipulates that any proposed legislation must be forwarded to, and accepted by, the Troika prior to making it to the floor of the Greek parliament. The July Memorandum of Understanding stipulates that the Greek government must “consult and agree with the European Commission, the European Central Bank and the International Monetary Fund on all actions relevant for the achievement of the objectives of the Memorandum of Understanding before these are finalized and legally adopted.” The Memorandum also contains prior actions that are required before receiving the next disbursement of funds. Such prior actions entail to reversal of legislation enacted by the Syriza government in the early months of 2015, including:  the reversal of article 72 in Law 4331/2015 that re-instated the after effects of collective agreements that had been frozen under Law 4046/2012, implemented by the quasi-technocratic caretaker government; and reversing amendments to the Income Tax Code that were introduced by Laws 4328/2015 and 4331/2015.

This extraordinary neutering of parliamentary sovereignty has formalized a relationship of political subjection that remained informal at the outset of the crisis. It has also, however, undermined the legitimacy of democratic institutions in Greece. Voter turnout in the September 2015 elections – the first after the July referendum – was 56%, an exceptionally low percentage in a country known for its high level of voter participation. Since the re-establishment of democracy in 1974 until 2009 (the beginnings of the crisis), voter turnout in Greece has averaged 77.9%, with a high of 81.5% in the elections of 1981. Since the imposition of austerity under the Troika, voter turnout has averaged 61.8%, with the recent elections last September representing the low point. At the same time, decreasing levels of trust in political institutions, “caused by the way political authorities are managing economic change,” has resulted in increased support for Golden Dawn, the far-right party.

Neoliberal Governance: The European response to the Eurozone crisis saw a renewed commitment to austerity through the development of economic governance. The Treaty on Stability, Coordination and Governance (TSCG), announced in December 2011 and signed in March 2012, signified a commitment by member states to “strengthen the economic pillar of the economic and monetary union” by demonstrating fiscal discipline as well as increasing the coordination of the economic policies of member states. The treaty bolstered the previous constraints embedded in the Stability and Growth Pact by committing signatory governments to eliminating what economists have called the “structural deficit.” As a medium-term objective, the new pact required member states to have a budget either in balance or in surplus, defined in terms of a “lower limit of a structural deficit of 0,5 % of the gross domestic product at market prices.” Thus, critics have argued that the TSCG acts to further lock in constraints intended to keep governments on the path of austerity.  What is clear is that the treaty binds contracting states to “take the necessary actions and measures in all the areas which are essential to the proper functioning of the euro area in pursuit of the objectives of fostering competitiveness, promoting employment, contributing further to the sustainability of public finances and reinforcing financial stability.” This requires a renewed commitment to economic coordination.

Embedded Neoliberalism: In response to the growing popular contestation of austerity, the EU has initiated a renewed integration process that seeks to achieve a genuine economic union by creating new institutions designed to institutionalize competitiveness and enhance the resilience of national economies. National Competitiveness Boards (NCBs) will be established in all Eurozone member states to act as “independent entities” mandated to surveil policies related to national economic competitiveness. Such bodies will be comprised of allegedly unbiased technocrats providing “high quality” advice on economic policy. In this regard, the recommendation adopted by the EU proposes that “the scope of intervention of competitiveness boards should span a comprehensive notion of competitiveness.” In the initial report, the Five Presidents suggest that the NCBs be mandated to “assess whether wages are evolving in line with productivity” and to potentially “enhance competitiveness more generally.” In the broader context of neoliberalism, and the longer term trends in collective bargaining in Europe, ensuring that wages evolve in line with productivity means ensuring that wages gains lag behind productivity gains. An important political dimension of the NCBs is to augment what the EU refers to as national “ownership” for the structural reforms for the enhancement of competitiveness.

There are a number of potential contradictions in the stated goals of the Competitiveness Authorities. According to the proposals, they are not intended to result in the harmonization of wage setting mechanisms or collective bargaining institutions. The adopted recommendation states that the NCBs “should not affect the right of workers and employers, or their respective organisations, to negotiate and conclude collective agreements at the appropriate levels or to take collective action in accordance with Union law and national laws and practices.”  Each member state will have the space to retain their distinctive institutions and arrangements. The first thing to point out is that, in the more severely affected economies of the Eurozone – Greece in particular – free collective bargaining has either been effectively suspended or has been significantly curtailed and restrained under the auspices of austerity politics. At the same time, however, the NCBs are intended to ensure a harmonization of outcomes – that is, to ensure that wage increases lag behind productivity increases. This effectively embeds the neoliberal logic of competitiveness that was supposed to be institutionalized by the transformation of social partnerships along the lines of competitive corporatism. Secondly, NCBs are intended to be democratically accountable; and it is proposed that they should include the social partners in the surveillance process to preserve the tradition of social dialogue. Yet, at the same time, they are intended to be independent bodies that are “independent from the ministries or public authorities that deal with competitiveness-related issues.” There is, therefore, significant potential that the NCBs possess a mandate to enforce the EU level commitment to competitiveness in ways that preclude alternatives that break from the neoliberal framework.



5 thoughts on “Neoliberalism and De-democratization in Greece

  1. Interesting analysis, thanks for posting. It seems to me above all that the ultimate problem for neo-liberalism is simply the legitimation crisis that flows from dramatic increases in inequality (social, economic, and political) on the one hand, and the continual messaging on the part of politicos that they are going to make the people more prosperous and better off on the other. I mean, how long can the political class keep selling a product which they don’t deliver — and not only one that they don’t deliver but one that gets further and further away each year? I think that the political/economic establishment could sell the destruction of unions, the decline in democracy, etc. if they weren’t delivering radical declines in wealth and security for the majority of the population.

  2. Hi there!
    A couple of quick comments on this.
    Your article is thorough, but I honestly had a tough time reading it because the font is too light.
    Also, I think of an important ‘tipping point’ for the Greek economy as the Olympics they hosted in 2004. There was an outrageous level of pressure on the country to invest, expand and host on a luxurious level, and yet little support for their effort.
    I personally believe that this effort broke the back of Greek finances, putting them in the position they are in today.
    Is it possible that the same thing is about to happen to Brazil? This country was pointing towards economic revival and world leadership and has turned into a basket case seemingly overnight. Should the Olympics be blamed?

    1. Yes, the Olympics were a drain on public finances, but they were a ‘one off’ that needs to be situated within the larger context of the structural weaknesses of the Greek economy. Perhaps a more important factor – in the sense of being a long-term structural drain on Greece’s revenues – was military spending. As late as 2009, Greece was spending just under 8% of its GDP on the military. Compare this with the UK. Britain spent only 5.7% of its GDP on defense. If we look at military spending in 2009 among the OECD countries (using the OECD database), the top five military spenders (again, in terms of percentage of GDP, not in absolute terms) are: the US, Israel, Korea, Greece and France! Anyway, the point is that the Olympics were expensive, and probably didn’t amount to any long-term benefit, but there are other more significant structural reasons behind Greece’s current situation (compounded with the pervasive problem of tax collecting in the country). As for Brasil, I don’t really know much about the country to comment on it. However, from what I’ve seen, it seems that there is more discontent around the Olympics (judging by the stories of protests found in the alternative press); and given the lack of legitimacy the current ‘post-coup’ government possesses (they are comprised of a small group of highly corrupt oligarchs), the discontent could grow. But those are political issues. I don’t know much about the structural causes of Brasil’s current economic downturn.

  3. Indeed, that is one of the key problems facing neoliberalism at the moment. And the crisis is accelerating. Across Europe, the centrist parties of the neoliberal consensus (social democratic and centre-right/Christian democratic) are either in a state of collapse, or are losing their traditional share of the vote. This has happened most dramatically in Greece, where PASOK has been all but obliterated, but it is also happening in Germany with the decline of the SPD; France, with the unstoppable self-immolation of the Socialist Party; Italy, with the collapse of Berlusconi’s Forza Italia, etc. Even in the states, the Trump phenomenon represents a far-right, populist rejection of the neoliberal policies of the past few decades. The concern, for me, in all of this, is that the moment is being seized by the far-right as opposed to the left.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s