Louka Katseli, latest MP to be expelled, explains her refusal to vote for a destructive measure

On Thursday, former labor minister Louka Katseli became the 7th socialist MP to resign or be expelled because of a refusal to vote on austerity measures. PASOK controlled 160 seats when it won the october 2009 election in a landslide. With the expulsion of Katseli, there are now 153 PASOK lawmakers left, only two more than the 151 required for a parliamentary majority.

This is Louka Katseli outlining her objections in parliament, Thursday October 20th, while large protests rage outside, at Syntagma square. 

"Burdened by this huge responsibility, I would like to outline the reasons why I am not in a position to vote yes on article 37 of the proposed law.

We all agree that measures introduced should spread the burden of adjustment as fairly as possible, and should also heed two basic principles:

a Achieve the largest possible fiscal gains

b Cause the mildest possible recession

Doing away with the principle of the "most beneficial regulation" and freezing the reach of sector-wide agreements, as per article 37, not only do we ignore these principles, we are in fact moving in the opposite direction.

Those measures are not saving costs, on the contrary, they induce recession and minimise tax revenue and insurance contributions. They do not improve competitiveness and they do not fight unemployment, because the country΄s low competitiveness is a result of high insurance payments and other factors dissuading investment, rather than high salaries.

The following example will clarify my point. Article 37 allows separate agreements in each business to trump sector-wide aggreements. This simply means that a shop assistant ceases to be covered by the aggreement that, in this sector, sets entry-level wages at 860 euro. One week after passage of the law, this employee will only be covered by the National General Collective Aggreement, setting entry-level wages at 740 euro. (ed.note This is the gross amount, including not only salary but also insurance contributions and taxes).

An agreement between the employer and the association of his employees, or even a few employees if there is no association, is all that is necessary.

Every business agreement could be adjusted downwards, since their is no lower limit, other than the minimum wage. This measure can be applied in every business, hiting over 1 million employees, out of the 1,9 million covered by collective agreements. 

What will follow?

The immediate consequence will be across the board, abrupt, out of control salary cuts. According to conservative estimates, of which I have informed the finance committee and which are now at the disposal of the plenary, this measure will deprive the Greek economy of multiple billions of euros, deepening the recession to 5% in 2012, rather than the planned 2,5%. The state income projections contained in the 2012 budget will be derailed and soon the Troika will be asking for new measures, purportedly because we missed the fiscal targets.

There will be even wider, long lasting repercussions. Workers΄ bargaining power and institutional protection is dissipating. Sector-wide agreements are not simply frozen for a few years, they are in fact being scrapped. This is because no employer will be motivated to join employer associations reaching sector-wide aggreements, if they are able to come to separate aggreements with their own employees. Competition amongst businesses of the same branch for lower wages will intensify causing continuous rounds of wage cuts and deepening the recession. In financial markets, we try to avoid a "credit event". Here, with these provisions, we are legislating a "labor event", abruptly redistributing income from employees to employers.      

Weaker employee associations and weeker labor unions will inevitably demolish collective entities. Very soon, there will be nobody to sit at the round table and bargain for a new National General Collective Agreement. If of course such a thing continues to exist, after the next round of discussions on the next loan tranche. "


On Thursday, former labor minister Louka Katseli became the 7th socialist MP to resign or be expelled because of a refusal to vote on austerity measures. PASOK controlled 160 seats when it won the october 2009 election in a landslide. With the expulsion of Katseli, there are now 153 PASOK lawmakers left, only two more than the 151 required for a parliamentary majority.

This is Louka Katseli outlining her objections in parliament, Thursday October 20th, while large protests rage outside, at Syntagma square. 

"Burdened by this huge responsibility, I would like to outline the reasons why I am not in a position to vote yes on article 37 of the proposed law.

We all agree that measures introduced should spread the burden of adjustment as fairly as possible, and should also heed two basic principles:

a Achieve the largest possible fiscal gains

b Cause the mildest possible recession

Doing away with the principle of the "most beneficial regulation" and freezing the reach of sector-wide agreements, as per article 37, not only do we ignore these principles, we are in fact moving in the opposite direction.

Those measures are not saving costs, on the contrary, they induce recession and minimise tax revenue and insurance contributions. They do not improve competitiveness and they do not fight unemployment, because the country΄s low competitiveness is a result of high insurance payments and other factors dissuading investment, rather than high salaries.

The following example will clarify my point. Article 37 allows separate agreements in each business to trump sector-wide aggreements. This simply means that a shop assistant ceases to be covered by the aggreement that, in this sector, sets entry-level wages at 860 euro. One week after passage of the law, this employee will only be covered by the National General Collective Aggreement, setting entry-level wages at 740 euro. (ed.note This is the gross amount, including not only salary but also insurance contributions and taxes).

An agreement between the employer and the association of his employees, or even a few employees if there is no association, is all that is necessary.

Every business agreement could be adjusted downwards, since their is no lower limit, other than the minimum wage. This measure can be applied in every business, hiting over 1 million employees, out of the 1,9 million covered by collective agreements. 

What will follow?

A generalised, abrupt and incontrollable private sector wage reduction will follow. According to conservative estimates, of which I have informed the finance committee and which are now at the disposal of the plenary, this measure will deprive the Greek economy of multiple billions of euros, deepening the recession to 5% in 2012, rather than the planned 2,5%. The state income projections contained in the 2012 budget will be derailed and soon the Troika will be asking for new measures, purportedly because we missed the fiscal targets.

There will be even wider, long lasting repercussions. Workers΄ bargaining power and institutional protection is dissipating. Sector-wide agreements are not simply frozen for a few years, they are in fact being scrapped. This is because no employer will be motivated to join employer associations reaching sector-wide aggreements, if they are able to come to separate aggreements with their own employees. Competition amongst businesses of the same branch for lower wages will intensify causing continuous rounds of wage cuts and deepening the recession. In financial markets, we try to avoid a "credit event". Here, with these provisions, we are legislating a "labor event", abruptly redistributing income from employees to employers.      

Weaker employee associations and weeker labor unions will inevitably demolish collective entities. Very soon, there will be nobody to sit at the round table and bargain for a new National General Collective Agreement. If of course such a thing continues to exist, after the next round of discussions on the next loan tranche. "