Politics: Finmin, IMF's Traa call for redundancies, wage cuts in public sector

There are too many people working in Greece's public sector, which has to be trimmed down to reasonable levels, Greece's Finance Minister Evangelos Venizelos underlined at the Economic Conference taking place at the Athens resort of Kavouri on Monday. 

"There are surplus staff in the public sector and there must be a rationalisation with transparency, with the guarantees of ASEP (public-sector staff recruitment council)," he said, adding that Greece's public sector must finally be reduced to the size corresponding to the size of the country’s economy.

The minister announced that decisions concerning public-sector organisations included in the Medium-Term Fiscal Strategy will be taken within the week, while the uniform public-sector pay scale will be ready in early October.

"We have delayed the structural changes. The privatisations must at last take place. We cannot delay any longer, it's a government decision. There has to be a restructuring of agencies and the closure of unnecessary organisations," Venizelos stressed.
IMF troika representative Bob Traa echoed the view that the public sector was too large and stressed that there should not be any "taboo" about public-sector redundancies, while advising an emphasis on structural changes and fighting tax evasion, rather than more taxes on the existing tax base.
Traa underlined that funds had to be released from the public sector to the private sector and called for the closure of inefficient state enterprises, a reduction in the workforce and cuts in wages that he said were often higher than in the private sector.
While rejecting any reduction in taxes at present, on the grounds that this would increase the size of deficits, he also noted that a continuous increase in taxes was not economically and politically sustainable.
He underlined the need to broaden the tax base and ensure that the better off made a bigger contribution. He also called for a simpler taxation system with greater transparency.
"The laws on taxation now exceed 740 pages in volume. I am not surprised that you are unable to collect tax revenues," he emphasised.
Traa said Greece deserved recognition its success in reducing the size of the deficit, disagreeing that the stabilisation programme had failed. He noted, however, that any further reduction of the deficit will be very difficult without structural reforms and that the deficit had to be reduced to sustainable levels.
He pointed to the experience of countries like Turkey and the Netherlands, which had needed roughly a decade for structural reforms to kick in and bring about a recovery.
Replying to questions, Traa said that the EU and IMF would support Greece, provided it implemented the reforms it had promised to carry out and met its targets.
Noting that the reforms had started off impressively but slowed after the local government elections, he suggested that their implementation was an issue for the entire political system and not just the government.
On his part, Venizelos commented on developments in Europe and said the Eurozone had to think hard about how it will deal with bigger problems if it was unable to fully cope with those of Greece.
The minister predicted that the recession will reach 5.5 percent of GDP in 2011 and continue in 2012, when the government aimed for a primary budget surplus.
On the repeated waves of measures, he explained that the government had to take action to make up for measures that did not have the anticipated results because of the inadequacies of the administrative mechanism.
“If we don’t do what has to be done now, we will have to do it not much later in conditions that are painful. Everyone knows this, I have briefed the leaders of the political parties and the representatives of social bodies,” he added.

ND attacks Finmin over thousands hired by public sector in 2010

Main opposition New Democracy spokesman Yiannis Mihelakis on Monday strongly attacked statements about making public-sector staff redundant, made by Finance Minister Evangelos Venizelos at the Economist Conference earlier the same day.
Mihelakis stressed that Venizelos was still refusing to answer why, in the midst of the crisis, the government had hired an additional 28,850 temporary staff in the public sector in 2010, as well as 3,353 people employed with project contracts.
Instead of replying to ND revelations about these immoral and illegal new appointments, Venizelos was making military-type pronouncements, attempting to impose a law of silence and political censorship on the main opposition, the media and anyone daring to have a different opinion, the spokesman added.

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