Greek Gov’t Rules Spending Controls & Wages-Pension Cuts Bypassing the Parliament

Posted by in Economy

With two legislative actions and fourteen ministerial decisions the Greek government caused serious damage to two state powers of a sovereign state:  the Legislative and the Executive. Bypassing the Parliament, the government drafted legislative actions that give the Finance Minister super powers.

Inspectors at ministries, local governments and public utilities enterprises will monitor fiscal targets and if they are missed, and utomatic spending cutbacks, tax hikes, municipality fees raises and exorbitant high property fees as well as wages and pensions cuts will be imposed.

In the second legislative action the government completed some of the so-called ‘prior actions’ that did not dare to bring in the austerity package bill (Memorandum of Understanding III) like cutting social welfare aid to those with low pensions below 65 years old.

The Greek government did not dare to include the contents of these legislative actions in the voting of the  austerity package multi-bill considering the risk of down voting as very very high.

 First Legislative Action

Public sector budgets will be monitored on a quarterly basis and if targets are missed at 10%, automatic spending cuts and tax hikes will be imposed. It is very interesting to note, that after 2.5 years in IMF there has been no monitoring of public spending and supervision of fiscal targets.

  • Strict supervision on three-months basis.
  • Economic Commissioners in all ministries that fail to meet fiscal targets by 10% and automatic budget cuts.
  • Economic  Watchdogs in Municipalities. In case of missing fiscal targets, automatic municipality fees hikes, 3 ‰ in property fees and expenses cuts. 
  • Public utilities enterprises (DEKO): funding cuts, wages cuts in executives and dismissal of them.
  • Privatizations: Privatisation revenues will flow within 10 days into a special escrow account held at the Bank of Greece. If privatizations targets are missed, another public asset will be sold. Part of the privatizations revenues will be used exclusively for the repayment of public debt. 

Second Legislative Action

Sweeping across several ‘prior actions’ demanded by the Troika. Such prior actions were not included in the austerity package bill and refer to issues like: 

  • Social welfare allowance (EKAS) will be given only low-income pensioners who have completed 65th year of age. (In the voted austerity bill the age was 64)
  •  pensioners with disability will be exempted from pension cuts only if they receive monthly allowance but not for foundation staying.
  • Only tetra- or paraplegic pensioners from the public sector will receive Christmas/Easter and vacation bonuses. This category will be also exempted from pension cuts.
  • Labour Ministry will not be able to cancel cuts in lump sum compensations of more than 35%.  (The voted austerity bill foresees cuts up to 83%)
  • retroactive cuts in special payrolls (as of 1.Aug 2012)
  • Pension cuts up to 20% for 3,000 euro/month (main pension and complementary)
  • Private Sector: Employers informing employees in advance and in written form about upcoming dismissal pays half of the compensation when compared to compensation without previous notice.
  •  generics drugs
  •  baby milk formula
  • open closed professions -among others taxi and tank drivers-,
  • also clauses for pensions and lump sum compensations (ministries will not be able to object lump sum cuts)
  • Pensions of Parliament employees will brought down into line with other public employees.

             (To Vima, ekathimerini, ProtoThema)

Constitution question

According to Greek Constitution, these legislative acts must be submitted to Parliament for ratification, strictly within forty (40) days of issuance. If the ordinances are not submitted to Parliament for ratification within this time or if not ratified by Parliament within three (3) months, they expire, but only for the future.

Greek constitution allows such legislative acts due to extraordinary and urgent conditions – I wonder, whether the Constitution had times of a real war in mind… To Vima noted that neither the President nor the courts of this country can specify what are these  “extraordinary and urgent conditions” but only the cabinet. 

Duty Fulfilled

The Legislative actions occur a day before the crucial Eurogroup meeting on Tuesday with Greece anticipating for the green line for the disbursement the 31.5 billion euro loan tranche. Government spokesman Simos Kedikoglou told Reuters on Monday that “We have delivered, fulfilling the final pledges we made.”

PS Is there a problem if the Executive Power (government) bypasses the Legislative Power (Parliament), gives up part of its sovereignty and stepps on the fundaments of a constitutional democracy? Possibly not, if we succeed in pledges (and ruin the people). Thank God, the commissioners are not foreigners. Phew!