chapter  8
21 Pages

The Limits of Engineering Collective Escape: The 2000 Reform of the Greek Labour Market

In recent years much debate has been generated over the need for the European economy to become more competitive. The introduction of the single European currency, the euro, in 1999 has unleashed a powerful stimulus to domestic transformation. With economies in the euro zone now ever more closely interdependent, hardly any area of domestic economic policy escapes European Union (EU) scrutiny. The formal rules of the Stability and Growth Pact and, more recently, the introduction of softer mechanisms of policy coordination such as the Open Method of Coordination (OMC) have produced a powerful new agenda for the structural adjustment of the European economy. Calls for the intensification of competition within the euro zone are challenging the traditional role of the European state in sectors such as telecommunications and energy. More importantly, the new reform agenda, with its focus on labour markets and

pensions, has opened up a passionate debate over the ‘modernisation’, ‘refocusing’ and/or ‘renegotiation’ of the European model of society (Martin and Ross 1999; see also Pochet 1999). The ways in which Europeans work and retire are now at the forefront of political and economic contestation. This paper looks at the process of labour market reform in Greece

since 1997, focusing in particular on the 2000 reform initiative launched by the PASOK government (Pan Hellenic Socialist Movement – Πανελλήνιο Σοσιαλιστικό Κίνημα) government of Costas Simitis. As indeed in many other EU member states, developments at the European level – in particular the Luxembourg and Lisbon processes – have had an important impact on the domestic reform agenda. Yet powerful stimuli for reform were also provided by the domestic context. By the end of the 1990s Greece had the second highest rate of unemployment and one of the worst employment records in the EU. Since the beginning of the decade the country had witnessed an unprecedented influx of economic migrants, the vast majority of whom remained at the margins of the labour market and received minimal protection from the Greek state. The weaknesses of the Greek labour market also had significant economic fallout. Greece’s poor employment record cost the government dearly in lost revenues and further undermined the financial sustainability of the troubled social security system. Distortions in the labour market were also blamed for the low levels of competitiveness of the Greek economy. Despite the powerful arguments for radical domestic adjustment,

however, the 2000 labour market reform initiative was marked by controversy and conflict between the government on the one hand and the social partners on the other. The legislation that followed has been widely regarded as failing to address the key weaknesses of the Greek labour market. In the process it had also undermined the government’s relations with both the unions and employers. The aim of this article is to look at how this failure of initiative and response came about. In doing so, the article places its empirical analysis into a game theoretic framework that seeks to reveal both the structural characteristics of the ‘2000 labour market reform’ game and the strategies followed by its main protagonists. References will also be made to actors’ low trust and the failure of a ‘winning’ package deal to emerge. These, it will be argued, produced powerful blockages to reform and eventually transformed the 2000 reform initiative from a prisoner’s dilemma to a deadlock game. The article is structured in four parts. The first reviews the main

characteristics of the Greek labour market in the late 1990s and highlights the basic parameters of the policy problem. The second part looks at the 1997 Confidence Pact (Σύμφωνο Εμπιστοσύνης) and the PASOK government’s difficulties in building a consensus over its 1998 labour market

reform. The third part looks at the domestic discourse of the 2000 reform initiative focusing on the actors’ strategies and the construction of the reform agenda. In its concluding part the article seeks to conceptualise the ‘2000 labour market reform’ game and highlight reasons that contributed to its rather poor outcome.