The dramatic reduction in the Greek public sector: 277,095 positions axed in three years

According to the figures, in 2009 the number of people working in the state sector either as permanent employees or on fixed term contracts came to 952,625 people. In December of 2013 that number had fallen to 675,530 – a drop of 277,095 or about 70,000 per year.
 
The group most impacted by the drive to shrink the public sector were those on fixed term contracts that were not renewed. In 2009, 148,634 people were employed in the state sector on that basis, however the vast majority lost their positions as a result of the government’s drive to reduce payroll costs. By December 2013 only 12,196 people remained employed on fixed term contracts.
 
The numbers highlight the indiscriminate nature of the cuts to the public sector. It should be noted that in many cases those on fixed term (and often low paid) contracts provided valuable services to ministries and municipalities, however it was legally much easier for the government to meet its Memorandum targets simply by not renewing those contracts rather than lay-off permanently employed state workers. The law in Greece as it stands was written to protect permanent public sector workers from layoffs except for in exceptional cases in order to prevent politically motivated manipulation of the civil service.
 
Similarly the majority of the remaining public sector reductions stem from individuals who retired and were not subsequently replaced. New hirings by the public sector have effectively been put on ice since the outbreak of the crisis. While this practice has allowed the government to reduce its payroll costs without directly increasing unemployment, it also means that the country’s biggest employer has all but stopped hiring young people, thus indirectly increasing youth unemployment which stands at well over 50%. With the private sector also largely moribund many young graduates have few options but to emigrate.
 
The reduction in staff numbers has occurred in parallel with drastic cuts in public sector salaries. As a result the payroll cost has dropped from 24.5 billion euros in December 2013 to 15.8 billion euros.
 
Many may welcome the cuts as necessary given the dominant narrative that it was Greece’s ‘bloated’ public sector that was the main driving force in the creation of its high levels of debt. However a more careful examination of the data reveal this to be somewhat of a myth. As illustrated in a recent book by political economist Zoltan Pogatsa, prior to the crisis Greece’s public sector spending in relation to GDP was actually below the European average. The real problem arose from a historic inability to collect revenue particularly from high earners (an issue that, incidentally, can only be solved by a well functioning civil service.)
 
And on this front progress has been more than disappointing. According to recently released figures in the six-month period between January and June 2014, the tax office conducted 344 audits of high income individuals (over the target of 307) and determined tax debts and fines of 377 million euros.
 
However to date only 19.1 million euros of that amount has actually been collected (versus the target of 50% of the amount or 188.5 million euros).

Few would argue that there were not inefficiencies in the public sector system prior to the crisis. However the above figures taken together appear to show that the policy over the past few years of sweeping horizontal cuts to the public sector was a case of using a sledgehammer to crack the wrong nut.