Unbearable cost

Three years have passed since the Greek state went bankrupt, but we still don’t know how many civil servants are employed or how much they are paid. Asked by New Democracy MP Evangelos Basiakos recently in Parliament, Alternate Finance Minister Christos Staikouras came up with a rather vague response on the issue. A document released by the 24th State Accounting Directorate, which was published in Kathimerini newspaper, meanwhile, said that “there is no available data on the number of beneficiary employees, nor on the earnings of employees in the broader state sector.”

According to this document – and without knowledge of what applies to the broader state sector – 13.9 billion euros, or 7.2 percent of GDP, of the 2005 regular budget went to salaries and additional benefits. Four years later, the government was a bit more generous as the 2009 figure rose to 18.5 billion euros, or 8 percent of GDP. It is estimated that state spending for salaries and extra benefits in 2012 will drop near 2005 levels, to around 13.7 billion euros.

Given that Greece’s GDP for 2012 is close to that of 2005 (193 billion euros), spending for government sector salaries and additional benefits continues to hover at 7 percent of GDP. In fact the wages and benefits of the central government seem to consistently make up 7 percent of the country’s produced wealth.

According to an IMF study (“Evaluating Government Employment and Compensation”) average central government spending on salaries in the EU between 2000-2008 was at 5.2 percent of GDP, that is 2-3 percentage points lower than domestic expenditures in the period 2005-2012 – a time period that includes the supposedly severe cost-cutting measures in the debt-hit country’s public sector. Even the African average of 6.5 percent of GDP is less than Greece. The Middle East and Central Asia do not lag that far behind at 7.1 percent.

What we need to emphasize is the steady percentage of produced wealth that goes to salaries and benefits for state sector workers. It is often said that our political system is incompetent, but it is doing a perfect job in reproducing the existing model. It’s not just the quality of staff (political cronies) but also the quantity. It does not matter whether Greeks produce less or more, the percentage for state sector wages remains steady at between 7-8 percent of economic output.

What if Greek politicians pledge to reduce the size of the state? What if they promise to abolish state agencies and organizations that serve no meaningful purpose? Soon after they have announced their intentions, the system switches back to its prior state. Greece pays for its bureaucrats 2 percent of GDP more than the EU average. And mind, this is a bureaucracy that they have repeatedly promised to curb.