For Greek workers, it’s a painful cornerstone of the first two bailouts: Labor market reform. Now it’s part of a third rescue package, according to the most recent last-ditch agreement to keep Greece in the eurozone.
The text released by European leaders on Monday is vague, but it suggests the following: Greece will keep in place existing restrictions on workers’ bargaining rights that creditors have successfully demanded in the past -- a drop in the national minimum wage and the weakening of sectorwide collective bargaining agreements. On top of that, Athens will pursue further measures designed to bolster the leverage of employers against unions. Likely among that new batch: laws that pave the way for companies to issue mass layoffs and rein in the ability of workers to go on strike.
Ronald Janssen, an economic adviser with the European Trade Union Confederation, suspects the reforms will resemble proposals Eurozone lenders made before the Syriza government came to power earlier this year on an anti-austerity platform: Before that election, he says, creditors pressed Greece to raise the quorum for strike votes and extend the advanced notice workers must give before walking off their jobs from 24 hours to 48 hours. They also wanted Greece to remove restrictions on lockouts, when bosses refuse to let employees work.
Is this the sort of tough love the country needs to get on the right track?
If the goal is to jump-start growth, then slashing bargaining rights makes little sense, said Ronald Janssen, who works with an organization that represents Greece’s top private- and public-sector union confederations.
“The problem in Greece and other countries like Spain and Portugal is the fact that there’s now open deflation and prices are falling,” Janssen said. “If you combine that with weak bargaining structures -- low minimum wages, no possibilities for strikes, the ability of employers to lock out -- then you have this toxic combination of falling prices and falling wages. And you get the opposite of what we called in the past an ‘inflationary wage price spiral,’ you get a ‘deflationary wage price spiral'.”
In other words, as incomes fall, the risk of further deflation grows.
“Deflation is of course the last thing that Greece needs because Greece has a high nominal debt,” Janssen said. “So if you push down nominal prices, nominal incomes, nominal wages, then Greece can’t pay back its debt.”
Alexander Kritikos, research director at the German Institute for Economic Research, is generally more sanguine about the need for business-friendly reforms in Greece. He says product markets are “over-regulated” and blasts “red tape everywhere” for discouraging potential investors in the country. But even he’s puzzled by creditors’ latest demands to target collective bargaining measures, and says he’s “not quite sure” why they want such reforms in the next agreement. Since the bailouts began in 2010, Kritikos points out, Greece has already agreed to cut the minimum wage and introduced reforms that make it easier for companies to fire people. “Collective bargaining is not the real problem,” he says.
Richard Wolff, an economist at the New School, says Germany’s own economic success belies the underlying premise of creditors’ proposals -- the notion that strong protections for employees pose a threat to long-term growth. Germany has a substantially higher minimum wage and shorter work week than Greece, he points out. It also has robust bargaining rules that allow employers and unions to negotiate agreements across entire sectors.
“Germany is walking proof that if conditions are different, you can make economic growth spectacular without savaging your working class, without depriving them of worker protections, without imposing crappy wages,” Wolff says. But he says the proposed reforms send a strong political message to other debt-ridden Eurozone economies like Spain and Italy. “You better impose austerity now, because if you don’t, you’re gonna get what Greece gets.”