Greek debt crisis spotlights excesses of civil service

22 March 2010

The financial crisis rocking Greece has brought into focus the warped reality of the country’s civil service, where a long tradition of political perks has bred fiscal disaster, analysts say.

Packed with political supporters of governments past and present – and often operating on its own rules – the Greek civil service has gorged itself to such a degree that even its nominal masters have trouble deciding where to start trimming waste.

‘Nobody, not even the prime minister, can say how many civil servants there are,’ says Constantinos Michalos, head of the Athens Chamber of Commerce and Industry, one of Greece’s main business lobby groups. ‘We calculate 1.2 million people including contract workers. The civil servants’ union says 700,000. The Finance Ministry says 800,000.’

In addition to trying to sort out the mess by reforming its wage registry, the socialist government of Prime Minister George Papandreou this month said all state staff would see 12 per cent cuts in benefits and 30 per cent cuts in holiday pay.

The socialists are trying to tame a debt of nearly 300 billion euros (S$568 billion) fuelled by a public deficit that grew to 12.7 per cent of output last year – more than four times the allowed EU limit of 3 per cent.

According to the Greek Interior Ministry, the number of permanent civil servants grew by over 28,000 people between 2006 and 2008.

Mr. Michalos, a former general secretary at the Finance Ministry, considered a honeypot among state offices, has no shortage of state-sector excess stories.

‘Cleaning ladies and press officers at the Finance Ministry receive double the pay of their colleagues at other ministries,’ he notes. ‘In Parliament, staff work for 12 months but receive 16 salaries. And civil servants get bonuses for dressing well and reporting to work on time,’ he said.

‘This monster was created by politicians,’ political commentator Stefanos Kassimatis wrote in the liberal Kathimerini daily last week. ‘They buckled under union pressure and kept on awarding privileges until it eventually escaped their control completely.’

The union representing civil servants, Adedy, says that bonuses, which can account for nearly half of total state staff pay, are essential to bolster its members’ nominal salaries which are ‘the lowest in Europe’. According to Adedy, civil servants make 1,350 euros (S$2,555) on average. The minimum wage in Greece is 740 euros.

‘There are anachronistic distortions to protect various groups or woo potential voters,’ said Yiannis Stournaras, general director of the Foundation for Economic and Industrial Research, a private think-tank. ‘In public hospitals alone, the absence of proper accounting leads to a waste of 1.5 billion euros a year.’

‘(Greeks) had hoped that the day of reckoning would come later. In the end, it came sooner because of the financial crisis,’ he added.

Mr. Papandreou has pledged to use the crisis to clean up decades of corruption and mismanagement in the civil service.

Studies have repeatedly shown that the Greek public sector is a graft haven with tax offices, urban planning departments and hospitals the worst offenders.

And the problem is getting worse, according to corruption watchdog Transparency International, whose local branch this month reported a 50 million euro rise in bribes last year to 790 million euros.

The average bribe was 1,355 euros in the public sector and 1,671 euros in the private sector, chiefly involving private clinics, banks and lawyers, according to the study, carried out by Public Issue for TI Greece.

‘The Greek civil service is the field where the crisis is at its most evident,’ Theodore Pelagidis, a professor of economics at Piraeus University and co-author on a new book on corruption, told AFP.

‘But it is not the cause of the problem,’ he argued. ‘The whole way the economy is organised is deplorable . . . the country has learned to live off EU funds, shipping and tourism proceeds – basically, money falling from a helicopter without being generated locally.’

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