Hard la­bor for the bailout ne­go­tia­tors

Many, in­clud­ing Greek gov­ern­ment, ar­gue there is enough job flex­i­bil­ity al­ready but the IMF dis­agrees

Kathimerini English - - Focus - BY NICK MALKOUTZIS

ANAL­Y­SIS Econ­o­mists and busi­ness­men lined up at the Del­phi Eco­nomic Fo­rum last week to in­sist that the la­bor mar­ket is not where the chal­lenges for the Greek econ­omy are to be found any­more. Some­how, though, the debate over whether fur­ther lib­er­al­iza­tion is needed or not has come to dom­i­nate the ef­forts of the gov­ern­ment and its lenders to con­clude the sec­ond re­view.

The in­sti­tu­tions de­parted Athens on Fri­day not­ing that “im­por­tant progress” had been made in the pre­vi­ous days. The gov­ern­ment also de­clared it­self sat­is­fied with the pace of ne­go­ti­a­tions af­ter a seem­ingly shaky start. Prime Min­is­ter Alexis Tsipras told re­porters at the Euro­pean Coun­cil in Brus­sels on Fri­day that a “tech­ni­cal agree­ment,” or staff-level agree­ment (SLA), is fea­si­ble by March 20.

How­ever, there are still sev­eral im­por­tant is­sues that have to be re­solved and Tsipras’s state­ment could yet prove far too op­ti­mistic. The most con­tentious of these, over­tak­ing dif­fer­ences about fis­cal mea­sures and ex­pan­sion­ary in­ter­ven­tions to off­set their im­pact on the most vul­ner­a­ble in so­ci­ety, is the call for more la­bor re­forms. While all sides in the ne­go­ti­a­tions could agree that there was con­ver­gence in some ar­eas, they would also ac­cept that they re­mained far apart on new changes to la­bor leg­is­la­tion.

The gov­ern­ment be­lieves that the lo­cal la­bor mar­ket has been dereg­u­lated enough due to in­ter­ven­tions made as part of the coun­try’s bailout pro­grams since 2010. It ar­gues that the ef­fort to re­store work­ers’ rights must be­gin now so they feel they have a stake in the econ­omy’s re­cov­ery. Fi­nance Min­is­ter Eu­clid Tsakalo­tos has ar­gued that if work­ers feel they are ex­cluded, this has po­lit­i­cal con­se­quences such as the rise of the far right in Europe and Don­ald Trump’s suc­cess in the US.

Nu­mer­ous steps have been taken since the be­gin­ning of the crisis to in­crease the Greek la­bor mar­ket’s flex­i­bil­ity and bring down la­bor costs. These in­clude dou­bling to 36 months the max­i­mum du­ra­tion for which temp agen­cies can loan work­ers to firms, in­creas­ing the length of tem­po­rary or in­def­i­nite con­tracts from two to 12 months, re­duc­ing the no­tice of ter­mi­na­tion to four months, lim­it­ing the max­i­mum sev­er­ance pay, in­creas­ing the max­i­mum staff mem­bers that can be fired each month, al­low­ing en­ter­prise agree­ments that con­tained dif­fer­ent em­ploy­ment and pay con­di­tions from sec­toral col­lec­tive deals, abo­li­tion of the ex­ten­sion prin­ci­ple, and the re­duc­tion of the min­i­mum wage to 680 euros gross.

The word from Del­phi was that enough has been done to en­sure that la­bor mar­ket rigid­ity is not an ob­sta­cle to job cre­ation or Greece’s com­pet­i­tive­ness. Unions have largely been by­passed and em­ploy­ers have the up­per hand, with high un­em­ploy­ment (23.1 per­cent in De­cem­ber) as well as a dereg­u­lated en­vi­ron­ment mak­ing it a buyer’s mar­ket.

Dur­ing the fo­rum last week­end, Bank of Greece Gov­er­nor Yannis Stournaras was one of those who em­pha­sized that fur­ther lib­er­al­iza­tion should not be a pri­or­ity. He did so while pre­sent­ing a slide show­ing how Greece’s unit la­bor costs com­pared to other eu­ro­zone coun­tries have dropped sig­nif­i­cantly since the start of the crisis.

The lat­est em­ploy­ment bal­ance data, pub­lished on Thurs­day, em­pha­size just how flex­i­ble the lo­cal la­bor mar­ket has be­come. Ac­cord­ing to the La­bor Min­istry’s Er­gani reg­is­ter, only 43.2 per­cent of the new hir­ings made in Fe­bru­ary were for full-time po­si­tions. Forty per­cent of the hir­ings were for part-time po­si­tions and nearly 17 per­cent for shift work. Over the last six months, flex­i­ble forms of la­bor have ac­counted for more than half of the hir­ings made in Greece.

In its re­cent Ar­ti­cle IV con­sul­ta­tion on Greece the In­ter­na­tional Mone­tary Fund high­lighted it was a lack of re­forms in other ar­eas, rather than the la­bor mar­ket, that had damp­ened the im­pact of the changes made over the last seven years.

“The re­forms al­lowed for a sig­nif­i­cant re­duc­tion in la­bor costs, help­ing to nar­row Greece’s wage-com­pet­i­tive­ness gap rel­a­tive to trading part­ners,” IMF staff wrote. “How­ever, par­al­lel re­forms in­tended to ad­dress rigidi­ties in prod­uct mar­kets have not gen­er­ated the hoped-for in­creases in pro­duc­tiv­ity and com­pet­i­tive­ness, due to slow im­ple­men­ta­tion in the face of strong op­po­si­tion from vested in­ter­ests.”

The gov­ern­ment un­der­took a com­mit­ment when it signed up to the third mem­o­ran­dum of un­der­stand­ing with its in­ter­na­tional lenders in July 2015 to launch a re­view of “ex­ist­ing la­bor mar­ket frame­works, in­clud­ing col­lec­tive dis­missals, in­dus­trial ac­tion and col­lec­tive bar­gain­ing, tak­ing into ac­count best prac­tices in­ter­na­tion­ally.” It was agreed that the re­view would be car­ried out by a group of eight ex­perts ap­pointed by Athens and the in­sti­tu­tions.

The com­mit­tee made a set of 12 rec­om­men­da­tions, most of which were unan­i­mous, in its fi­nal re­port last Septem­ber. These in­cluded leav­ing the rules on call­ing a strike un­changed, not re­mov­ing the pro­hi­bi­tion of lock­outs (denial of em­ploy­ment ini­ti­ated by the em­ployer in a la­bor dis­pute), of­fer­ing the al­ter­na­tive of short-time work in the case of col­lec­tive dis­missals and giv­ing the so­cial part­ners the re­spon­si­bil­ity of ne­go­ti­at­ing a range of work-re­lated is­sues, such as se­nior­ity pay, the du­ra­tion of col­lec­tive agree­ments and whether ar­bi­tra­tion is needed.

The gov­ern­ment ex­pected that these pro­pos­als would form the ba­sis of the dis­cus­sions about bring­ing lo­cal la­bor leg­is­la­tion in line with the best prac­tices in Europe and else­where. How­ever, the IMF took a dif­fer­ent point of view, de­spite its be­lief that the lack of ef­fec­tive prod­uct mar­ket re­forms is the main prob­lem for Greek com­pet­i­tive­ness.

“With no ex­change rate flex­i­bil­ity and a long way to go to re­duce un­em­ploy­ment, there is lit­tle doubt that fur­ther la­bor mar­ket flex­i­bil­ity is needed to at­tract both do­mes­tic and for­eign in­vest­ment and fa­cil­i­tate the re­struc­tur­ing of in­debted Greek firms,” wrote Fund of­fi­cials in their Ar­ti­cle IV re­port, while warn­ing against ef­forts to un­wind pre­vi­ous re­forms: “In­stead, ex­ist­ing re­forms should be com­ple­mented with ad­di­tional mea­sures to bring Greece’s col­lec­tive dis­missals and in­dus­trial re­la­tions frame­works in line with in­ter­na­tional best prac­tice.”

As a re­sult, the IMF has been push­ing for an in­crease in the thresh­old for col­lec­tive dis­missals (cur­rently at 5 per­cent of the work force per month) and the scrap­ping of the need for preap­proval from the La­bor Min­istry for such ac­tion. The Fund also wants to see “ap­pro­pri­ate” quo­rum re­quire­ments for unions call­ing strikes and for em­ploy­ers to have the right to im­ple­ment “de­fen­sive” lock­outs. The IMF be­lieves this would re­duce the num­ber of strikes and their cost.

The Fund’s view, though, is to­tally at odds with the gov­ern­ment’s, while the EU lenders have re­mained mostly silent on the is­sue. The two ques­tions that come to mind are how we have ar­rived at the point where, at such a cru­cial time in the ne­go­ti­a­tions, the views on this is­sue can be so di­ver­gent and whether there is any chance they can be rec­on­ciled in the com­ing days.

The IMF wants to see ‘ap­pro­pri­ate’ quo­rum re­quire­ments for unions call­ing strikes. It be­lieves this would re­duce the num­ber of strikes and their cost.

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