drawn and quartered

Today the Prime Minister and party leaders of Greece are meeting up after their ‘negotiations’ with the Troika.  All day, they’ve been breaking into regularly scheduled programming on TV to tell us which of our rights they are agreeing to repeal.

Among other things, they’ve agreed to axe minimum wage by 22%.

The impact of such a measure differs from what it would be in the US because of the sheer percentage of Greek workers who will be affected.  It is quite rare in Greece for a worker to be hired at higher than minimum wage.  The worker works for three years at minimum wage, after which it is slightly increased; after another two years it is increased again.  All these wages are affected.

22% is a big number – around one fifth.  In reality though, it’s more than that.  Unlike most countries, Greek salaries are paid out fourteen times per year, instead of twelve.  The reason behind this is that Greek retirement pensions are based on the “monthly wage.”  In a regular system, the monthly wage is given twelve times per year, and the pension is based on Annual Salary / 12.  But if the monthly wage is given fourteen times per year, the pension is Annual Salary / 14.  So they’ve been using this rather underhanded way of cutting retirement pensions for years.  The two wages that are not tied to calendar months are nicknamed “gifts” in Greek, but of course they aren’t gifts, they’re just as much a part of a pre-agreed salary as the June or October wage.

However, because this shady approach to reducing retirement payouts isn’t used in other countries, it’s not well understood.  I’ve read it described as a “bonus” in international media.  Because the 13th wage is paid in mid-December, and the 14th wage is distributed between two religious holidays (Easter and the Dormition of the Virgin), many people think of these wages as holiday bonuses.

Which, obviously, makes them the target of international journalists and politicians everywhere.  What could be more shocking than a Greek wage-earner getting a Christmas bonus?  So, of course, we must cut them.

For some reason, the Greek politicians decided that they should ‘save’ the 13th and 14th wage by sacrificing the minimum wage, unemployment benefits, job security, and a variety of other silly perks that Greeks ‘enjoy.’

However, since the 13th and the 14th wages are based on the regular monthly wage, reducing the minimum wage automatically reduces the 13th and 14th wages also.  And while the 13th and 14th wages only total 4/28 of a private sector worker’s annual income (public sector workers get much smaller 13th and 14th wages that are only a fraction of a regular wage. and are unaffected by this measure), the new 22% reduction in the wage scale means that Greeks will actually lose 7/28 of their annual income, or exactly one quarter.

So the one-fifth reduction in wage is actually a one-quarter reduction in income.

In American terms, it means that a person making $50,000 in 2011 would make $37,500 in 2012.  In Greek terms, it means that someone who made 11,500 euros in 2011 would make 8,625 euros in 2012.

In other words, it’s such a severe reduction that the economy will retract significantly in the coming months, following the established pattern of the past few years.

No politician has tried to argue to the contrary – in fact, they have been upfront about this reality.  They are proud of ‘saving’ the 13th and 14th wages, however.

Even if the politicians come to an agreement on all of this today, it still has to be voted through Greek Parliament with a simple majority, probably this Sunday.

While the Greek political leaders may well agree on all this – after all, they do seem proud of their accomplishments – I have my doubts about Parliament.  PASOK, the party voted into power in 2009, still has a majority of seats in Parliament, but the party’s popularity was polled at around 8% this week.  The individual PASOK parliamentarians may well decide to distance themselves from the party and their disgraced leader George Papandreou by voting against the agreement.

If the agreement is voted down in Parliament, Greece will likely default in the next several weeks.

If the agreement is voted through, the average Greek family will likely default in the next several months.

Advertisements

22 thoughts on “drawn and quartered

    • Greece can only leave the Eurozone if either the politicians decide to do it themselves (currently appears unlikely, at least as far as the party heads are concerned) or if we default (which the current agreement is meant to prevent, at least in the shortterm). It could certainly work, the problem is that we can’t do it by ourselves (the people).

  1. The whole world has been turned upside down by politicians, greed, corruption, and self interest. The people of every country are now having to deal with the ramifications of years and years of this kind of behavior. It’s an awful situation

  2. Thanks for explaining this so clearly! It’s hard to grasp the details, as an outsider, but it isn’t hard at all that this is a disaster for the Greek average families either way… It’s so tragic, and so little we can do… except hoping that the Greece and the European politicians will take the right decisions – somehow…

  3. take a look on the link, explain all the situation here..
    NO DEMOCRACY!NO GREECE ANYMORE!!
    we are so mad, so sad and so ..have no words..the political thiefs sold the country!
    but we didnt aprove the IMF..they are only 167 people who can deside for 10m?
    support GREECE! nobody came here for help..they pretend for all.
    sad thinks will happen thinks that Europe after 1941 have never seen..
    German?a new money machine is growing like..i dont want to remember..i dont want to spell the world..but NAZI are back.. we are rendering and we will be machive to our political system..we will REBORN DEMOCRACY!OR DOMINO EFFECT WILL BLOW ALL EUROPE..ITALY,SPAIN..WHICH COUNTRY IS NEXT?..

    ΔΗΜΟΚΡΑΤΙΑ!

  4. Thanks for explaining something that is often mis reported in the UK press. The current troubles make me sad for Greece but it won’t stop me travelling there. It irritates me that the UK Government sends £280m in foreign aid to India but seems to stand by as Greece suffers.

    On a different subject I like your blog header – Sifnos is my favourite island!

    • thank you Andrew – I love Sifnos too! we lived on Folegandros for two years so Sifnos was the view from our veranda 🙂 Was there something in particular that’s being misreported in the UK press, or do you mean just in general? I sort of gave up following the BBC’s coverage of the Greek crisis over a year ago because I was so frustrated by the way it was handled – so much said that while perhaps not technically incorrect was soooo misleading and often implied the complete opposite of reality. It got to the point that we started jokingly referring to misleading statements as “as reported by the BBC.”

      • Folegandros – another island in my top 5! Have stayed several times at the Vrahos hotel close to the port.
        I fear lots of things are misreported. In particular the 13/14 month payment thing is generally referred to as a financial perk.

  5. And will this affect the wages and the bonuses of the governmental workers too? I mean all those in high ranks, who sit all day on their asses and get paid a load of money for doing almost nothing? I think they should start with them, and then get to the people who barely earn a few hundred euros per month.

    • well, it is true that some Parliamentarians don’t accept their high pay. but to answer your question, to my knowledge, the high ranking people have no cuts to their salaries, but all other governmental workers have already had massive cuts to their salaries as of Nov 1, 2011. My husband is a government worker; his salary was cut by 56% and he now makes less than 600 euros/month.

      • That’s exactly what i mean, those who really get the big money, wouldn’t cut their wages, or renew their expensive cars every year or so, or expensive equipment they claim they need for their work. Or whatever protocol houses they are living in and they are paid from public money too. They should tighten the belt too, not only people like your husband who gets now less than half of his wage.

  6. Pingback: a new form of contraception in Greece | homeingreece

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s