A Greek law forcing employers to seek government approval for mass layoffs is too vague and violates European Union laws, the EU's top court ruled on Wednesday, potentially complicating Athens’s stance in talks with international lenders.
The case was brought to the European Court of Justice after Greek cement maker AGET Iraklis, whose main shareholder is LafargeHolcim, was prevented in 2013 from making collective redundancies by the then-government because of the economic crisis and the high levels of unemployment in the country.
The court ruled that the Greek law goes against EU rules on companies' freedom to set up businesses in EU states.
“The Greek legislation is liable to constitute a serious obstacle to the exercise of freedom of establishment in Greece,” a note from the court said.
The judges recognized the principle that a government is entitled to block mass layoffs "in certain circumstances in the interests of the protection of workers and of employment,” but said the Greek law was too vague and gave the authorities excessive discretion "beyond what is necessary.”
The fact that Greece was suffering an economic crisis and very high unemployment is not enough to justify blocking mass redundancy plans, the court said.
The ruling risks complicating the Greek position in talks with its international creditors under an 86 billion euros ($89.3 billion) bailout program, the third received by the country since 2010.
Negotiations between Greece and its lenders on reforms needed in the country hit a snag earlier in December on an overhaul of the Greek labor market.
Lenders are pushing Athens to soften labor protection rules to make layoffs easier, but the government of leftist Prime Minister Alexis Tsipras has so far opposed the overhaul.
Talks have been further complicated after Greece decided to give in December a 600 million euro payout to poorer pensioners without prior consultation with its creditors.