Reform Rebellion In Greece

Wolf Richter's picture

By Wolf Richter

Just as another avalanche of demands and new plans to bailout Greece rolls over the Eurozone, Greek society is digging in its heels. The bailout Troika (E.U. Commission, European Central Bank, and IMF) stipulated that Greece reform its government sector as condition for further bailout payments. Giorgos Papandreou, the prime minister, and his finance minister, Evangelos Venizelos, promised to do so, and parliament passed some laws to that effect. But now the ministries pulled the rug out from under them.

The government sector dominates the economy with 151 ministries and money-losing state-owned enterprises that employ 1.3 million people. But inefficiencies and corruption have made it a drag on economic growth and development. And it's a money suck with high salaries, overstaffing, early and well-paid retirement, and a host of other issues. During the initial phase of the reforms, 10% of the 700,000 civil servants and 600,000 employees should be transitioned from their jobs into a paid (60% of salary) retraining program and finally into the private sector. Long term, reductions of several hundred thousand people would be needed to accomplish meaningful results.

As condition for the next installment of €8 billion in bailout money, Venizelos should have delivered to the Troika a list with names of people to be transitioned into the private sector—30,000 people by the end of 2011, a first step. But Greek ministries and state-owned companies have ignored the directives by parliament to come up with those lists and cut their budgets (Welt, article in German). And, get this, instead of delivering lists of employees to be cut, they submitted letters demanding that additional positions be created.

This institutional refusal to get off the gravy train that huge government deficits had made possible for so long is systemic. There is resistance on all sides, with constant lobbying, political maneuvering, ministerial refusals, strikes, demonstrations, and civil unrest.

Strikes wreak havoc on the already damaged Greek economy. For example, in Athens subway employees, train engineers, and bus drivers went on strike simultaneously; they saw their rich pay and benefit packages threatened. Result: public transportation in Athens came to a standstill. Even Taxi drivers were on strike that day to prevent reforms that would liberalize the taxi market and open it up to competition. The day before, there were street battles between police and demonstrators. Now, the police union has called for a strike to protest salary cuts.

The Troika's deadlines are constantly missed. None of the promised privatizations have occurred, and none are being worked on seriously, though the first €5 billion in proceeds were supposed to arrive by year end. They are being counted on to keep Greece out of default. Any efforts to institute a functional tax collection system are immediately torpedoed. And Papandreou's promises have been broken without fail since the first bailout negotiations in 2010. No surprise that creditors have lost all trust.

The missing list of employees to be cut was one of the reasons the Troika inspectors left Greece angry in mid September. Now the dance starts again as the inspectors are supposed to return to Greece (only to depart angry).

That this will never work is clear. The Troika should instead initiate and encourage public discussions across the Eurozone about the two realistic options: either keep Greece on the dole, or allow it to default, exit the eurozone, and start over again in a manner Greek society sees fit.

For more: "We're not doing this for the Greeks, but for us," said Angela Merkel. France Simmers In Its Own Juices, Germany Frets

Wolf Richter

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agent default's picture

They will not let Greece go until they are convinced the Eurozone can withstand the shock.  Then they will let go.  The reality however is that the Eurozone is dead and buried.  The Euro is very much a dead currency at this point, European banks are insolvent and the EU is headed towards a brick wall.  Next up:The dollar and US banks. The more I look around, the more I feel that the system is about to reset.  Big time reset.

Moe Howard's picture

Bend over and take it like a Greek.

goldnguns's picture

We prevented the communists from taking over right after we kicked out the Germans.  The Germans have been thanking us profusely for the last 66 years for getting them out of Greece.  maybe we should have muted Winston Churchill and let the communists win.  I've got some friends in Thessaloniki and I told them 15 years ago that they couldn't last the way they were running the country.  Everyone, everyone, was "retired" - maybe working a second job for spending moeny but still retired.  They are scared right now, pulled their money out of banks and bought "stuff" that can be moved out of the country.

fonestar's picture

It's funny how for boomers, with thousands of years of history to reference, things always have to come back to WWII or the 60's.

Things that go bump's picture

This is what the future holds for the US.  We should be paying attention and taking notes.  

pantheo's picture

The property tax will be never work, so the deficit will rise. There is no infrastructure in the power companies to cross check data about square meters, or who is uneployed or not. On the top of this, it is unconstitutional to cut the power supply if someone dosen't pay an extra tax. Troika is doing her work, reporting as such, but there is not even one chance that Greek people will pay the relevant tax, especially during this timeframe that are paying the power bill in installments

richard in norway's picture

the greeks have already taken a huge "haircut" on their standard of living, it seems they are at their wits end. the taxi drivers are pissed because they took out large loans to pay for permits but now they are facing compertion from guys who havent paid large sums of money for permits and dont have huge debts to pay. i get their point the rules have been changed half way through the game and they are getting hosed the govt should give back the money they took forr permits. all the stories coming out of grecce have another side to them


dont you guys get it the greeks are being set up as the patsys for the collopse


it will be in the history books "the economic collapse of 2012 was the fault of the greeks" there will be no mention of bankers

Capitalist10's picture

Too bad their standard of living was financed entirely with borrowed money and totally unrealistic given their lack of a work ethic or any sense of responsibility.  Its hard to feel any sympathy for anyone who goes on a spending binge by maxing out their credit cards and then tries to play the victim when the bill comes due.

The Greeks are not being set up as patsies.  There is no one more richly deserving of being the poster child for the failure of the Eurosocialist Ponzi scheme.

Its a shame actually that we can't have both A) Greek bondholders taking a huge haircut for being stupid enough to lend to these spoiled children and B) the Greeks being forced to repay every euro they borrowed, with interest.

Piranhanoia's picture

Ron,  everyone's standard of living is financed entirely with borrowed money and totally unrealistic. Why blame the patsy?

Capitalist10's picture

That may be largely true of siesta countries like Greece, but it's simply not true of many people in northern Europe, the US, Canada and Asia who work hard, pay their bills and live within their means.

Those peoples' patience with subsidizing lazy moochers is rapidly wearing thin.

shazbotz's picture

Todays headline in Greek Newspaper...




GoatETF's picture

Look at it from the Greek people's perspective, why change? They want to keep their piece of the pie and like most cultures sacrifice is for the other guy. Imagine what the return on investment is for a few days of protesting and not doing what needs to be done, they have been able to keep up the status quo.

On most of the .gov contracts I've been on, most .gov employees are like the Greek people. Their punishment when not doing their job is less reponsibility and less expectation....what's not to like.

More teachers paid to do nothing: 700 in New York City alone


DeadOnArrival's picture

Fred Sanford: Oh, this is the biggest one I ever had. You hear that Elizabeth? I'm coming to join you honey.

williambanzai7's picture

The strategy has to be suck as much as you can until the very end.

ElvisDog's picture

"Suck for Luck", Greek-style.