3.

MANAGEMENT OF THE CRISIS

3.1. Actions taken in 2011

After the new government was elected in October 2009, the public opinion started
to have doubts about their country’s ability to pay it’s debts. Even if the prime minister
kept assuring people about the economic stability of the country, in may 2010 he had to
accept a bailout valued at €110 billion. The bailout was carried by EU, ECB and IMF.
In order for the bailout to be accepted the EU, ECB and IMF required from
Greece to impose austerity measures and a drastically raise in revenue in order to get
back on track. In January 2011 more corrective measures wore required by troika (EU,
ECB and IMF) in addition to the first two packages of reform.
Because the public sector was found to be the most responsible for the situation,
the austerity had the biggest impact over it. The corrective measures affected parliament
and government officials and all the public sector employees. All the salary bonuses
were cut for them and all the employees who had a salary higher than €3000 a month
would get no bonus whatsoever. Both the private and public sector wages wore frozen
with an exception of 1.6 rise in 2011 and 2012.
In terms of young people there had been some changes too, the minimum wage
was lowered so those under the age of 21 could be paid less that 80% plus pension and
insurance, those between 15 and 18 years old could work for 70% of the minimum wage
and those under 25 years old who are hired for the firs time could get a salary lower than
the minimum wage.
For the employees in the public sector between 25 and 65 years old that don’t
work anywhere at the time would be compensated by OEAD (Manpower Employment
Organization). Public insurance contributions for both public sector and private sector
were increased by 3 points starting with 2011. Also, the Greek government is working
towards making the closed professions (accountants, notaries, pharmacists) easily
accessible to the public, but this action was delayed because the government had to face
sanctions imposed by the EU.
In terms of pension system there had been a number of changes planned before
the bailout but as all the other reform plans it was postponed. Greece and most of the
European countries is facing an aging population problem, out of it’s 11.2 total
population only 4.4 million are working and 2.6 million are pension receivers. They are
estimating that by the year 2060 86% of the population will be dependent on at least one
form of government help from its resources. The government has its hopes on he
immigration and birth rate in order to get on the right track.
A new pension reform was voted for in July 2010 after it had been postponed 50
times. The changes the reform brought are the following: the 13th and the 14th pensions
are cut if they received more than €2,500 per month and they will receive €400 for
Christmas, €200 for the summer and €200 for Easter. Exception from that make those
who have a minimum number of years of tax paying and those who are having a child
under 18 years old or student under 24 years old.
With all those we should consider the fact that the Greek public employees
compensation was one of the highest of the OECD countries even if the other countries
had a higher percentage of public employees compared to the total work force. The
increase of the pension was froze until 2013 and as opposed to the previous pension
system where the pension was calculated as an average of the last 5 years of salary, when
they should get the highest income, now it was calculated for the entire period of activity.

Source: OECD, National Accounts Database, 2007
Government employees as a percentage of total work force in
European countries and the compensation level of public servants compared to the total compensation of the work
force.

The pension paid to widows will continue to be received integrally if the widow
can prove that she was married for at least 5 years, the payment will start to be received 3
years after the death. The minimum pension was increased by €360 and it was set to be
increased according to the GDP and the consumer price index in the year 2014.

The pension can’t reach 65% of the retiree’s income while he was still working.
In the past the Greeks got up to 95% of their income and this was calculated for the last 5
years when they had the highest income. The age of retirement was equalized in the new
pension system to 65 years. As with the year 2020 they are planning to increase the
minimum age for retirement depending on the life expectancy. Although the retirement
age is at 65 the workers can retire before but their pensions will be reduced, the reduction
is 6% for every year before the retirement age. The full pension is now at 65 years of age
and after 40 years of work and no one will be granted to retire at 60.
In the case of high risk professions the age of retirement is now set at 60 instead
of 55 starting with January 2010, but with the new amendment made in July 2010 the age
was lowered from 60 to 58.
The Social Insurance Solidarity Account is reinstalled as of august 2010 and will
work in the following conditions. The retirees with a pension of €1,401 to €1,700 will
contribute with 3 percent, €1,701 to €2,300 will contribute with 5 percent, €2,301 to
€2,900 will contribute with 7 percent, those with a pension between €2,901 and €3,200
pay 8 percent, those between €3,201 and €3,500, 9 percent and those with a pension of
€3,501 or above will contribute to the fund with 10 percent.
The mothers in the public sector can retire at 53 in 2011, 56 in 2012, 59 in 2013,
62 in 2014 and 65 in 2015 while the mothers working in the private sector will retire at
55 in 2011, 60 in 2012 and 65 in 2013. Besides al these the Greek military and security
suffered drops in retirement age and cuts.

Source: OECD, Pensions at a glance, 2009
Greek pensioners enjoyed the gross pension replacement rate, the
percentage of their salary that they received as pension, among many OECD countries.

Another issue is the that of uninsured labor which is more common between immigrants.
With the new reform the government assured a minimum pension for the uninsured who
meet the income requirements and lived for at least 15 years in the country. Trough this
the government tries to reduce the number of uninsured workers.
In terms of taxes there had been some rises imposed starting with July 2011, the
VAT raised from 21 to 23 percent for goods and services. There were also imposed
additional taxes for alcohol, tobacco and fuel the taxes raised by 10 percent. In the case of
luxury cars, both new and old, the taxes raised by 10 to 40 percent depending of the
brand and its price.
As a last addition to the changes in taxation there has been added a new online tax
whose purpose is to sponsor online journalists, besides this, all the TV advertisements
had a new tax of 20 percent. Another new contribution for somewhere around 50,000
people whose salaries reach €100,000 per year.