ATHENS – With public workers set for another barrage of pay cuts – teachers already bracing for a retroactive salary slash of 380 euros, or $525 per month – European Economic and Monetary Affairs Commissioner Olli Rehn has proposed labor cost reductions in the private sector to bring them down to the barely-above minimum wage level many municipal employees will soon be getting.
Rehn said the move was necessary to return competitiveness to the Greek economy, which is on the edge of default and surviving only through $152 billion in international loans. Speaking in Brussels, seat of the European Union, Rehn said severe austerity measures imposed by Greek Prime Minister George Papandreou are not enough and have reduced the country’s labor costs by only 6.8% overall, although many workers have seen pay cuts of 20% and now face another round of deep reductions – retroactive to the first of the year.
Rehn said that besides salary cuts and tax hikes, “a sustainable rise in productivity can only be achieved with structural reforms,” citing privatizations and restructuring of public companies.
Private sector workers have been fearful their salaries would fall in line with those of public workers and have joined them in a series of massive demonstrations, some of which have ended in violence and riots. Rehn said cutting private workers pay would make the prices of products and services more competitive with those of other countries, but he said it’s up to the Greek government to make the decision.
He said that according to data from the EU’s statistical arm, Eurostat, the rate at which labor costs rose in Greece in the 2000-09 period was 20 percent higher than in the rest of the Eurozone, the 17 countries that use the euro as a currency.
The Athens newspaper Kathimerini noted that while that figure was correct, since the economic crisis hit Greece 18 months ago, both labor costs and nominal pay in the economy as a whole have fallen substantially compared to the rest of the Eurozone. Labor costs in Greece fell nearly 4 percent in the 2009-11 period, and nominal pay 4.5 percent. In the Eurozone, labor costs have declined 1.9 percent and nominal pay has risen 3.9 percent on average.
Rehn also said inspectors from the Troika of the EU-International Monetary Fund-European Central Bank are returning to Athens to resume an analysis of the country’s books ahead of a decision whether to release the next installment of $11 billion in rescue loans, without which Greece will run out of money by mid-October. He said he expects the review to be finished by the end of the month – after the date of the next installment. Rehn reiterated that Greece must “fully meet” its agreed fiscal targets and welcomed the latest austerity measures announced by Papandreou, which have led to unions vowing action.
Beleaguered teachers, who have seen their pay cut to about $15,000 a year for those with 30 years service – while Members of Parliament are making about 10 times that amount – are discussing whether to conduct so-called “White Strikes,” a work stoppage in which they would go to schools but not teach. Rehn though applauded a new property tax that will hit working class Greeks hard, although the rich, who many Greeks believe hide their assets, could again escape, as they have through tax evasion costing the country as much as $40 billion a year.
Rehn said the work on involving the private sector in a second Greek bailout package of $157 billion is proceeding according to plan, despite widespread concerns that banks’ willingness to participate has been less than hoped. Banks have been told they will get 21% less than promised and that has led to a number of them balking on an agreement the EU reached to keep Greece solvent.
“The essential thing is that Greece will have to meet the fiscal targets and fill the implementation gaps in structural reforms in order to enhance growth and competitiveness of the Greek economy, and thus also convince its partners that they will continue to support Greece through the conditional loan package, which will be discussed tomorrow in the eurogroup,” Rehn told reporters in Brussels.