Why Greece is slashing public sector jobs

Amid much protest in the streets, the Greek government last night passed a law firing thousands of public sector workers.

Twenty five thousand public servants – mainly teachers and municipal police – will be placed in a layoff scheme by the end of 2013. They have eight months to find another position or get laid off.

Why? According to Reuters, ‘Greece’s public sector is widely seen as oversized, inefficient….’

Lazy journalism, once again. What are the facts? Greece’s public sector may well be relatively inefficient, although there is little reliable data on public sector productivity and the press rarely if ever quote hard evidence. But the charge that it is oversized is nonsense.

The number of state employees in Greece is below the EU average. Indeed, according to the OECD ‘Greece has one of the lowest rates of public employment’ among advanced economies, with general government employing just 7.9% of the total labour force in 2008. Across the OECD area, the share of government employment ranges from 6.7% to 29.3%, with an average of 15%.

The OECD also notes that compared to other developed countries, the Greek government spends a much smaller portion of resources on education (8.3% vs. 13.1%), and only some of that is down to a smaller school-age population. So why are teachers targeted for lay-offs?

Of course there is waste in government expenditure. For example, Greece spends large amounts on defence. According to The Guardian, ‘No other area [of spending] has contributed as heavily to the country’s debt mountain. If Athens had cut defence spending to levels similar to other EU states over the past decade, economists claim it would have saved around €150bn – more than its last bailout. Instead, Greece dedicates up to €7bn a year to military expenditure – down from a high of €10bn in 2009.’

Germany, the world’s third largest arms exporter, has been profiting handsomely from a mini- arms race between Greece and Turkey. It also happens to be the ring leader within the EU-European Central Bank-IMF ‘Troika’, offering international loans to pay this defence debt off – at the price of austerity measures such as these brutal cuts to the public sector workforce.

At a time when the private sector is not hiring but firing, this will add to unemployment. This in turn will further hit the economy as in Greece which is heavily dependent on household spending – 74% as against 58% for Germany, according to the World Bank

In short, more misery and self-perpetuating austerity, for a country now in its sixth year of recession and where unemployment is expected to rise to 28% by the end of next year, according to OECD forecasts published this week.

With a little help from the media, the myths perpetuate, and Greece burns.