Since democracy was restored in Greece after the fall of the junta in 1974, the Greek political establishment developed on the basis of polarisation, most notably since the late 1970s when the socialist party of PASOK, under the leadership of Andreas Papandreou, established itself as a political force to be reckoned with.
After the result of the May 6 elections, the political system has lost this balance as PASOK has paid a severe price for an austerity program that completely destroyed the economy and violently changed the lives of the majority of Greek society. The radical left party of SYRIZA has risen to become a challenger with undisputed momentum to take the first spot in the coming elections.
This new uncharted territory of the local political dynamics, combined with SYRIZA’s admittedly lack of cohesion on views related to the economy – a product of the various factions that the SYRIZA coalition incorporates – forced Greece’s political system to invent the new dilemma that will polarise the June 17 elections and create familiar waters to navigate through during the campaign.
The new divisive question is pro or anti mnemonio, as Greece’s memorandum with the troika is called.
Greece’s politicians yet again fail to rise to the challenge and they are missing the opportunity to have an informed debate about the country’s response to this devastating crisis. Most importantly, they remain incapable of finding areas where their views can converge and shape a national strategy in the negotiations with the troika that all parties could support after the elections.
The country should not waste any further time and effort in the pseudo-dilemma of pro or anti mnemonio and even at this late stage put the focus on the biggest flaw of the new memorandum.
The recent program of the troika is designed on four main pillars; structural changes to the economy, fiscal sustainability, public sector reforms and restoring competitiveness, which is where the troika got it totally wrong.
An open and business friendly economy, sustainable and responsible management of the public finances, a citizen friendly and efficient public sector are not, and should not, be seen as being imposed by any outsider. A Greek government that is worth its salt should drive and ensure implementation of these measures out of respect of the country’s citizens. Battered by two years of austerity, they deserve at the end of all this to have a state and an economy that is in line with the rest of the advanced, and in some cases, the rapidly developing world.
On the other hand, the new government will certainly need to focus on the reversal of the troika’s recent obsession with Greek wages and the overall so-called labour market reforms.
Greece’s creditors took a very narrow view on this topic and primarily in their attempt to correct the serious damage that their policies had on employment, they attempted to get people back to work by making employment, in particular employment of the age group below 25, substantially cheaper.
Further, following the motto of ‘flexibility to hire and fire’ the troika completely dismantled the labour market and collective agreements which they branded as ‘rigidities’, with the intention to make individual or company level wage agreements the norm in the Greek labour market, in the name of competitiveness that according to the memorandum is comparable to other countries in south-eastern Europe.
First of all, what needs to be debunked is the misconception that the Greek labour market was rigid and wages an obstacle to the country’s competitive development. There is strong evidence that can support the arguments of the new government in the attempt to reverse the deterioration of the labour market.
Taking some of the graphs from a Deutsche Bank research on structural reforms that uses OECD data, it is evident that Greece is not an outlier by any stretch.
Greece’s minimum wage compared to the median wage in the economy is pretty much in line with the OECD average and below a number of other euro area countries.
Additionally, from the recently published OECD Taxing Wages report, a basic calculation of the average wages in purchasing power parity makes it evident that the average wage in Greece has not changed significantly as a ratio to other euro area countries and the growth of the average wage is not substantially larger even compared to Germany.
Again, from Deutsche Bank’s research when looking at the percentage of workers covered by collective bargaining agreements or belonging to a trade union, it is evident that the Greek labour market is not particularly rigid or in any way an obstacle to doing business.
Equally importantly, this obsessive focus on cutting wages in Greece had a detrimental effect to one of the objectives of the program, the fiscal sustainability. The initial 2012 budget had a primary surplus of 2.4bln, or 1.1% of GDP. The reduction in wages, with the knock on effect on budget revenues deferred the country’s ability to generate a surplus and extended Greece’s dependency on troika to finance the state’s operations.
The data and evidence is there. Greece’s political leaders should drop the meaningless pre-election shadow fighting and form a negotiating line with the necessary arguments to correct the main deficiency of the new program and revert the path that will take Greece into yet another year of deep recession, further damaging incomes and the economy.
It is not time for pseudo-dilemmas, it is a time for a united front.