The democratic challenge of social reform in Greece under SYRIZA

Jonathan Scheele (Senior Member, St Antony's College, Oxford)

On 15 November 2016, George Katrougalos (former Minister of Labour and Social Security, now Alternate Foreign Minister in the Greek Government) spoke, with a panel of discussants: Bernhardt Ebbinghaus (Mannheim University), Marek Naczyk (Kellogg College) and Pavlos Eleftheriadis (Mansfield College). Kalypso Nicolaidis chaired the session.

Katrougalos explained the context of Greek pension reforms and his perception that SYRIZA had taken what he described as a “neo-liberal” commitment, contained in the MoU signed with the EU and the IMF, and incorporated it into a “progressive” pension reform. 

His presentation of the context of the reforms took in aspects of Greek politics – characterised by a clientilistic culture and general popular distrust of the traditional political parties – and what he described as the EU’s apparent lack of democracy – Syriza perceived the EU as determined to make an example of Greece to prove that only one economic policy was possible and that any deviation from this would lead to failure. The SYRIZA government’s painful dilemma was a choice between no agreement, leading banks to close and pensions not to be paid, and the painful compromise of signing an MoU containing policies it was hostile to. The MoU contained two types of policy – reforms of clientilistic [practices, which they supported wholeheartedly, and neo-liberal reforms that they considered dangerous to Europe itself; SYRIZA’s rejection of the MoU only related to the latter.
Pensions reform was a case study in what they were trying to do – respecting commitments, even ones they didn’t like, while incorporating them into parallel reforms SYRIZA wanted. The Greek pensions system was complex and fragmented (with 350 separate funds reduced to 13, but with 930 different schemes) with major inequalities within and between generations, and in chronic deficit, while continual cuts imposed as part of the austerity programme had led to a generalised loss of confidence in the system.

The outcome of the reforms, which foresaw a reduction of pension expenditure by 1% of GDP alongside a redistributory effect, was: 

• The integration of all social insurance funds into one, with full harmonisation of rules on contributions and pensions;
• The establishment of two pensions components: a national pension, financed exclusively by taxes, at 60% of median income, after 15 years’ work and with no means test; and a contributory defined benefit pension.

Questions by Ebbinghaus and Naczyk focused on the detail of the reforms – noting that, while the two-tier system adopted offered better protection than the Bismarckian system in a deregulated labour market, it contrasted with the absence of any minimum income system for people still in the labour market, for women and single mothers. It would make sense to move from a pension heavy system of social risk to a more flexible one as the economy improved. They also wondered about the degree of public ownership of the reforms and its sustainability when it faced the challenge of implementation by a weak public administration. Furthermore, would it be successful for the young who had not had the chance to find a job over recent years and thus establish a qualification in terms of years worked? Would it not have made sense to go for a full Beveridge system, rather than maintain the orthodoxy of full funding?

Eleftheriadis approached the issue from a more political viewpoint, though a different one from SYRIZA. His fundamental question was whether the policy followed of initially rejecting the MoU and later accepting it had led to a loss of momentum of the embryonic economic recovery that had been in place prior to 2015. He also questioned the lack of any attempt to establish a guaranteed minimum income and wondered why the government had wanted to remain in the EU if, as Katrougalos had said in 2010, it was so odious.

On the system reforms, Katrougalos responded that many of the ideas suggested would be desirable, but the government had been constrained due to the obligation to pay existing pensions. On the more political aspects, he stressed that SYRIZA’s option was not to leave the EU, but to reform it, in the belief that austerity was harming Europe and that the defence of the status quo would condemn Europe to death. As regards the minimum income, the MoU required it to be done with zero impact on the budget; in these circumstances, SYRIZA preferred a services-oriented immediate aid, as more effective than a minimum income.

The subsequent discussion covered a range of issues: 

• Clientilism – its elimination required a change of mentality,
• SYRIZA as the new PASOK – both had become part of the same clientilistic system while SYRIZA sought to break it. While SYRIZA resembled in some ways the PASOK of the 1980s, PASOK had subsequently changed and moved to the right.
• Why SYRIZA had gone into coalition with ANEL – an extreme right wing party – rather than Potami – SYRIZA shared with ANEL an anti-austerity line, while it saw Potami as neo-liberal.

Overall, this was an enlightening insight into the challenges and complexities of grappling with economic reform while maintaining a left-wing perspective – whether or not it was convincing would largely depend on one’s political point of view.