A Closer Look

Greece – National Reforms Programme, the Job Market and the national 2020 target

According to Labour Force Survey (LFS), the average number of employed (aged above 15 years) declined by 149.6 thousand people in 2013 against 2012 (i.e. a 4% y-o-y decline), following a 8% y-o-y drop in employment in 2012 versus 2011.

Overall, the impact of the recession on employment has been significant, as between the fourth quarter of 2008 and the fourth quarter of 2013, the total number of employed (aged above 15) decreased by 963.9 thousand people (i.e. a 21.2% decline in employment). However, this employment decline was not accompanied by a decrease in the labour force – the labour force exhibited a marginal increase of 0.1% in the same period. It seems that, despite the reduced employment opportunities, individuals remain in the labour market in an effort to improve household income.

Capture d’écran 2015-07-06 à 08.04.45

Chosen excerpts by Job Market Monitor. Read the whole story at  Greek National Reforms Programme 2014


A Crisis Explainer

Pensions

The IMF wants Greece to stop its pension fund from running a deficit, while the EC is more lenient. The demands include ending early retirement and cutting government contributions to try and lessen the financial burden.

One Greek pension official let slip in 2013 that Greece had 133 separate pension funds – a huge number that it hoped to whittle down to fewer than 20. Simplifying the system might help the government see where cuts are possible.

German newspaper Die Welt reported that Greece has shown signs of flexibility on increasing retirement ages and cutting supplementary pensions.

Greek Labour Minister Panos Skourletis (centre) talks to Interior Minister Nikos Voutsis at a Syriza party central committee meeting in Athens Labour market reforms

Creditors have reportedly tried to force Syriza to reverse its decision to raise the minimum wage.

But the Telegraph reported that Greece’s Labour minister Panos Skourletis said the policy would go ahead, calling it a “deep and immovable red line” for the government.

Cash in: hedge your bets when buying euros Primary budget surplus

This refers to balancing Greece’s accounts, or making sure that the country is not spending more than it is taking in.

Reports on Wednesday suggested the text of an agreement would require a primary surplus of about 1 per cent of gross domestic product this year, lower than the 3 per cent originally required.

There is a danger that the Syriza party could vote to block budget cuts, even if Tsipras was prepared to make concessions.

A 2010 demonstration in Athens against cuts to the civil service Civil service

In May, Athens announced plans to rehire some 13,000 civil service workers let go by the previous government in an attempt to cut costs. That government also eliminated annual evaluations for civil servants and promotions based on merit, according to the FT.

Syriza also said it wanted to rehire 15,000 workers at the now-closed state TV broadcaster. This would be reportedly be funded by the auction of television licenses.

Chosen excerpts by Job Market Monitor. Read the whole story at  Greece crisis explainer: what reforms are EC, IMF and Athens arguing over? – Business News – Business – The Independent.


Factsheet — The IMF’s Advice on Labor Market Issues

The IMF’s advice on labor market issues is tailored to each country’s circumstances. In Europe, for instance, several countries are currently faced with the challenge of having to regain competitiveness to boost growth. Because eurozone membership implies that the nominal exchange rate cannot be devalued and interest rates cannot be adjusted in an individual country, and because productivity increases only take hold over time, improving competitiveness may require a reduction in costs, including labor costs.

In Greece, unemployment has increased sharply since the 2008 global financial crisis, exceeding 27 percent in mid-2013. As a member of the eurozone, Greece cannot devalue its currency. This means it needs to close its competitiveness gap by other means until reforms to improve productivity produce results.

Unit labor costs―a key measure of competitiveness―increased by over 35 percent in Greece during 2000-10, compared to less than 20 percent in the euro area as a whole. At end-2011 Greece’s minimum wage was substantially higher than that of its closest competitors—50 percent higher than Portugal, and 17 percent above Spain, for instance. This is one of the reasons why Greece’s exports amount to only about 14 percent of the goods it produces. To help restore competitiveness, the minimum wage was reduced by 22 percent in February 2012, with a further 10 percent reduction for youth. In addition, the IMF-supported program targets a budget-neutral reduction in non-wage costs by 5 percentage points.

Chosen excerpts by Job Market Monitor. Read the whole story at  Factsheet — The IMF’s Advice on Labor Market Issues.


10 Consequences of Greece’s ‘No’ 

Here are 10 consequences of the vote that could unfold in the next few days:

1. The victory of the “No” camp — with more than 60 percent of the vote, according to preliminary returns — will initially lead to a general selloff in global equities, along with price pressures on the bonds issued by Greece, other peripheral euro zone economies and emerging markets. German and U.S. government bonds will benefit from a flight to quality.

2. Having been caught off guard, European politicians will urgently seek to regain the initiative: Chancellor Angela Merkel of Germany and President Francois Hollande of France will meet in Paris on Monday to work on a response. In a perfect world, these leaders would move quickly and effectively with the Greek government to get past the conflict and acrimony that preceded the referendum. This is likely to be difficult, given the mistrust, bad blood and damaging accusations that have poisoned the relationship.

3. Even with those challenges, Greek and European politicians don’t have much time to get their act together. The horrid conditions in Greece will get a lot worse before they improve. Without huge emergency assistance from the European Central Bank — a decision that faces long odds — the government will find it hard to get money to the country’s automated teller machines, let alone re-open the banks.

4. As hoarding increases, shortages of goods, including fuel and food, will intensify. Capital and payments controls will be tightened. The economy will take another worrisome step down, worsening unemployment and poverty. And the government will struggle to pay pensioners and the salaries of civil servants.

5. As a result, the government will be under mounting pressure to issue some type of IOUs to maintain a sense of a functioning economy. If it does, the IOUs will take on the role of a parallel currency, quoted domestically at a discount to the single currency.

6. Outside Greece, a lot of thought will be given to limiting adverse spillovers. The ECB will most likely have to roll out new measures to contain regional contagion, including expanding the current program of large-scale purchases of securities. This will weaken the euro’s exchange rate. In addition, together with the International Monetary Fund — to which Greece is already in arrears — officials will be preparing for serial Greek defaults.

7. All parties involved will find themselves slipping into their Plan B mode. This transition will probably be much more traumatic for Greece than for the rest of Europe.

8. With the ultimate goal of countering as quickly as possible the likelihood of further human suffering, pain and uncertainty, Europe has the instruments and institutions to limit contagion and maintain the integrity of the euro zone. But this will require ECB action to be coupled with measures by the European Stability Mechanism and the European Investment Bank aimed at completing a banking union and making progress on fiscal integration.

9. It is quite doubtful, however, that Greece will be able to restore its status as a full member of the euro zone. Indeed, without very skillful crisis management, it is at high risk of becoming a failed state. Rather than just stand by, Europe needs to ensure that Greece’s exit from the 19-member euro zone doesn’t also result in its dissociation from the larger European Union. This could involve special membership in an association agreement, for example,

10. Finally, expect an explosion of blame. This unproductive activity may end up delaying Europe’s urgent need to internalize the lessons from this sad outcome: A series of broken reform promises by several Greek governments was made worse by political stubbornness, poor analysis and inconsistent follow-through by Europe, which is contributing to the loss of Greece as a functioning member of the family.

Chosen excerpts by Job Market Monitor. Read the whole story at 10 Consequences of Greece’s ‘No’ – Bloomberg View.

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