This year’s negotiations between employers and labor unions on a national pay pact, which are to get under way soon, will likely face difficulties. For starters, relations between the General Confederation of Greek Workers (GSEE) and the Federation of Greek Industries (SEV) could not be worse, after the passing of the new labor relations law last summer which introduced severe cuts in overtime pay. The situation in the economy does not allow for any generous pay raises in public utilities and these are certain to be below the inflation rate for the first time in the public sector. The situation with the lowest-paid workers, who have no supplementary sources of income, is deteriorating and has led GSEE to demand increases for them which seem exorbitant. According to its Labor Institute, about 30 percent of wage earners are now in a particularly difficult state. They are mostly those who earned a sizable segment of their income from overtime work. They are the ones to whom GSEE leaders are referring when the labor authorities talk about monthly income losses of 16.6 percent. According to European statistics (Eurostat – Statistique en brief, 8/2005), the lowest monthly nominal salaries in the EU vary between 437 and 668 euros in Portugal, Greece, Spain, Slovenia and Malta. Only Portugal surpasses Greece in the inequality indicator (1) and they are both above all 10 new, incoming members. But the Greek average monthly salary is also far below the EU average, 1,315 euros against 2,030, according to the European Commission’s database, Ameco. Officials of employers’ organizations seem to support – in principle at least – greater-than-average increases to the lowest-paid new employees. But they insist that for those with previous work experience, who are entitled to specific raises every three years, the raises cannot go beyond 3.5 percent. And they set as a precondition for both the signing of a two-year agreement, as in the past 10 years, and the freezing of sectoral pay pacts. However, agreement on a two-year pact is not likely, unless it is accompanied by strong offsets. At any rate, GSEE sources indicate that the umbrella organization will walk out of the negotiations if the employers come up with a starting offer of 3-3.5 percent. They do not even rule out recourse to arbitration as an extreme possibility. Such an eventuality, which would largely depend on the political climate, would not favor the employers’ organizations either, because it would annul their intermediary role. In any case, the balance of power would be of decisive importance. GSEE seems strengthened lately, and, despite the occasional internal friction, DAKE, the government-affiliated grouping, is working in line with the others on pay pact issues. GSEE president Christos Polyzogopoulos has decided to remain in his post until the spring of 2007, putting an end to scenarios of internal realignments. On the whole, it seems that the need for it to adopt a more combative stance for the protection of workers’ incomes has buttressed the labor organization and it is now regrouping its forces. The pact negotiations process will be a test for confirming this informal new role. (1) The basic inequality index is the ratio of the income of the wealthiest 20 percent to the income of the least wealthy 20 percent. In Greece this ratio has steadily remained above 6.