Final Paper - Vanos

8/3/2019 Final Paper - Vanos

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P.I.G.S. in a Blanket1:

The Consequences of the Greek Debt Crisis on LaborMobility in the EU

Georgia Vanoss

TABLE OF CONTENTS

I. Introduction ................................................................................................................. 1

II. Background Information on the Greek Debt Crisis ..................................................... 6

III. Current EU Law Regarding the Free Movement of Persons ..................................... 10

IV. Proposed Policies and Legislative Reforms in Greece ............................................ 14

V. Balancing Possible Reforms in EU Law and Greek LegislativePolicies ..................................................................................................................... 20

VI. Conclusion .............................................................................................................. 25

I.INTRODUCTION

They see no future for themselves in the country where they live.

2

This

statement unfortunately encapsulates the reality that many Greeks are facing, in light of

the debt crisis that affected their homeland. The current situation has forced a growing

number of Greeks to seek employment outside their countrys borders, especially in

other European Union (EU) member states.3 Consequently, this paper will consider the

potential impact the crisis may have on labor mobility within the EU, and the prudent

1 P.I.G.S. stands for Portugal, Italy, Greece and Spain, the Blanket refers to the European Union (EU).sCandidate for J.D., California Western School of Law, 2010; B.A. with an area of concentration in SportManagement, Morehead State University, 2005.2 Iason Athanasiadis, Greece Dogged by Brain Drain: Young Greeks Leave Home to Find Employment,Global Post, May 30, 2010, http://www.globalpost.com/dispatch/europe/100528/greece-bailout-unemployment.3

Helen Smith, Greek Debt Crisis Faces Double Blow of Brain Drain and Early Retirement, Guardian,May20, 2010, http://www.guardian.co.uk/business/2010/may/20/greece-brain-drain-retirement-crisis.


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policy response that both Greece and the EU should implement to curb the effects of

the crisis on the labor market.

Since the EU is one of the most integrated regional models in the current global

community4, the impact of the Greek debt crisis and subsequent bailout is the first true

test for the solidarity of the EU.5 Many issues have arisen since the declaration of the

crisis and the announcement of the Eurozone and International Monetary Funds (IMF)

bailout package6. The Eurozone is the name for the group of EU member states who

use the Euro as their currency, and who have a single monetary policy overseen by the

European Central Banks Governing Council.7 The IMF on the other hand is the

organization that is responsible for the global financial system.8 To date, due to the

infancy of the crisis, scrutiny has only involved its economic implications. For this

reason, it is important that other issues, such as the impact on labor mobility, receive

scrutiny so that interested parties may achieve a holistic perspective regarding the

consequences of the crisis.

Due to the ever-changing demand conditions in a flexible labor market, the

market requires a high degree of labor mobility so that employment can adjust to market

4Roger Blanpain et al., The Global Workplace: International and Comparative Employment Law Cases

and Materials, 276 (Cambridge University Press 2007) (2007)(discussing the general framework of theEU).5

David J. Lynch, European Crisis Batters Euro a Decade After a Celebrated Launch, USA Today, June 3,2010, http://www.usatoday.com/money/world/2010-06-03-eurocrisis03_CV_N.htm (Domenicio Lombardi,a former member of the International Monetary Funds Executive Board, stated that if the crisis movesbeyond Greeces boarders it could be the end of the euro itself.).6 Smith, supra, at 1.7 European Central Bank, Glossary, May 20, 2010,http://www.ecb.europa.eu/home/glossary/html/glosse.en.html (definition of Euro Area which issynonymous to the term Eurozone).8

International Monetary Fund,About the IMF, May 20, 2010, http://www.imf.org/external/about.htm(Describing the role of the IMF).


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demands.9 Ineffective allocation of labor may cause long-term implications on growth

and output and a short-term stunt in the pace of economic growth.10 Thus, the free

movement of labor is a cornerstone in the foundation of the EU and it is a fundamental

component in the quest to achieve a single market economy.11

Ironically, labor mobility in the EU is quite low. Estimates indicate that in the year

2000, only 0.1% of the population in the member states who were part of the EU at the

time, changed residences between two EU countries, and only 0.4% of the population

commuted across boarders to work.12 On the other hand, estimates show that annual

interstate mobility in the United States is 2.5%, a rate much higher than that in the

E.U.13

Even though the EU provides for the free movement of workers, labor mobility

still continues to be very low. This is primarily due to administrative and legal obstacles,

language barriers, the costs associated with moving, inefficient housing markets, the

portability of pension rights being limited, issues associated with the recognition of

professional qualifications in other countries, and job openings not being transparent.14

Despite these barriers, policy-makers continue to recognize the benefits of increased

labor mobility. However, a debt crisis such as the one Greece is facing , may drive labor

mobility to unprecedented rates for both the sending and receiving member states.

9 Frigyes Ferdinand Heinz & Melanie Ward-Warmedinger, Cross-Boarder Labour Mobility Within an

Enlarged EU, European Central Bank Occasional Paper Series No. 52, 7, (2006), available atwww.ecb.int/pub/pdf/scpops/ecbocp52.pdf.10Id. at 7.11Id.12Id.13 Bonin et al., Geographic mobility in the European Union:Optimising its Economic and Social Benefits,European CommissionDirectorate General for Employment, Social Affairs and Equal Opportunities, 29 (2008), available athttp://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=385.14

Heinz, supra, at 7.


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Thus, because of the crisis, modifications to the principle of free movement of labor

require consideration.

Initial data since the introduction of the Greek governments austerity measures

are alarming. Salaries for first year public sector employees are expected to be under

600 Euros or $740 U.S. dollars a month, according to new legislation that is designed to

save 40 billion Euros over three years.15 Furthermore, since the announcement of the

pension reforms in April 2010, almost 19% of state employees have applied to resign

from positions that they might have otherwise held for life.16 Due to such staggering

numbers, the labor minister publicly appealed to government employees to stay in their

posts.17

In light of such information, this paper will consider several issues. Part II will

examine the background of the Greek debt crisis and the severity of its impact on labor

mobility within the EU, especially considering the expected increase in the number of

Greek citizens leaving Greece. Part III will consider current EU laws that deal with labor

mobility. Part IV will analyze the current state of affairs in Greece, and the proposed

policies and legislative reforms that the government is implementing that will directly

affect labor mobility. Part IV will also address issues regarding the expected brain drain.

Finally, Part V will consider the possibility for reform in EU law and Greek legislative

policies, by balancing the free movement of labor with the policy needs of individual

countries.

15Athanasiadis, supra, at 1.

16Smith, supra, at 1.

17Id.


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Examples of the reforms discussed are: 1) considering change in EU policy; 2)

continuing to simplify current EU law; 3) reducing formalities associated with labor

mobility within the EU; 4) having the Greek government introduce work-sharing

programs; 5) lifting the 2010 hiring freeze for public sector positions in Greece; and 6)

developing job search assistance programs. These reforms will not only facilitate job

creation but will also place members of the Greek labor market into appropriate

positions.

II. BACKGROUND INFORMATION ON THE GREEK DEBT CRISIS

Following an economic crisis, it is common to see a series of governments, also

referred to as sovereigns, begin to default on their debt.18 A default occurs when

anythingchanges a debt contract to less favorable terms from the original contract to

the lenders.19 Economic crises create a period of recession in economies where

government revenues decrease, and deficits and debt increase, which result in many

governments defaulting on their obligations.20

Greece is currently facing a sovereign debt crisis. In early May of 2010, a historic

financial package of 110 billion (approximately U.S. $145 billion) was announced by

members of the Eurozone and the IMF in an attempt to prevent Greece from defaulting

18 Rebecca M. Nelson et al., Greeces Debt Crisis: Overview, Policy, Responses, and Implications,CRSReport for Congress R41167, May 14, 2010, 1, available atwww.fas.org/sgp/crs/row/R41167.pdf.19 Posting of Jon Hilsenrath, Q&A: Carmen Reinhart on Greece, U.S. Debt and other Scary Scenarios,Wall Street Journal, February 5, 2010, 07:33 EST, http://blogs.wsj.com/economics/2010/02/05/qa-carmen-reinhart-on-greece-us-debt-and-other-scary-scenarios/ (Carmen Reinhart is a prominentEconomics professor at the University of Maryland. In this interview, she gave a synopsis of the Greekdebt crisis and defined some relevant key terms).20

Nelson, supra, at 1.


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on its debt obligations and to inhibit the crisis from spreading into other EU countries.21

Since the announcement that Greece would receive a financial assistance package, an

additional package of 500 billion (approximately U.S. $636 billion) was made available

to other EU countries who are also vulnerable, in an attempt to curb the contagion of the

crisis to other parts of the EU.22

Historically, Greece is no stranger to default. In fact, since its independence in

the 1830s, Greece has been in a state of default about 50% of the time. 23 Therefore, it

is not surprising to learn that over the last decade, the Greek government borrowed

heavily in order to satisfy its budget and account deficits.24 From the time the Euro

became the official currency in Greece in 2001, up until recently, the average budget

deficits of Eurozone members were 2%, Greeces deficit measured 5%, and current

account deficits averaged 1% in the Eurozone compared to 9% in Greece.25 Based on

those figures, Greece has deficits of more than double that of its Eurozone

counterparts.

In an effort to fund its deficits, Greece borrowed heavily from international capital

markets.26 Due to its high deficits and reliance on external financing, Greeces economy

also became vulnerable to fickle investor confidence.27 Several factors lead to low

investor confidence, especially during the latter part of 2009. First, the new

governments revised estimate for the budget deficit more than doubled the estimate

21Id.22Id.23 Hilsenrath, supra, at 1.24 Nelson, supra, at 2.25

Id.26

Id.27

Id. at 3.


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that already existed, going from 6.7% of GDP to 12.7% of GDP.28 Second, there was

concern that a state-controlled holding company in Dubai, Dubai World, would also

default on its loans, signaling a possibility that other sovereigns with high external debt

could default on their debt obligations.29 Finally, accusations that the Greek government

falsified statistics in an attempt to conceal its true debt and high bond spreads, also led

to a decline in investor confidence.30

Due to decreased investor confidence and high levels of debt, Greece reached a

point where it would not be able to cover maturing debt and interest payments in 2010.

These events lead to the Eurozone and IMFs decision to provide funds to assist

Greece and to prevent contagion of the crisis to other EU countries.

The Greek debt crisis has created many economic issues not only for Greece but

for the EU as well. However, the crisis also implicates social concerns such as labor

mobility within the EU. Historically, labor mobility has been quite low in the EU despite

having the freedom of movement of persons as one of its fundamental rights.31

Even

though one in five Europeans envision working abroad in the future, only very few

actually do.32 In fact, 28% of Europeans would not consider working abroad regardless

of the salary offered.33

There are several reasons for this phenomenon. Despite some legal and

administrative obstacles preventing Europeans from exercising their right to free28Id.29 Nelson, supra, at 3.30

Id.31 The Treaty Establishing the European Community title 3, art. 39, 298 U.N.T.S. 11.32 Report of the Directorate General for Employment and Social Affairs, Special Eurobarometer 337 /Wave 72.5 - Geographical and Labour Market Mobility,8, (2010), available athttp://ec.europa.eu/public_opinion/archives/ebs/ebs_337_en.pdf.33

Id.


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movement, many have sentimental ties to their home countries. Almost 40% of

Europeans would decline work abroad because it would require them leaving their

homes. Around 27% would prefer not to make drastic changes to their life for the sake

of their families.34 On the more practical side, 19% of Europeans would decline an offer

to relocate if it would require them to learn another language and 4% believe that the

economic climate is better in their own country than it is abroad.35

Considering the current economic climate, these attitudes may change slightly.

However, it is unlikely that Europe will experience drastic levels of labor mobility. This

might be because the catalysts that drive this lack of mobility in Europe seem to be

ingrained in the culture. However, even a slight increase in labor mobility may strain EU

member countries since they have not dealt with any significant influx of migrants from

fellow member countries since the formation of the EU. Therefore, even though the

number of migrants might be low, the effects of such labor mobility may be widespread.

III. CURRENT EU LAW REGARDING THE FREE MOVEMENT OF

PERSONS

A cornerstone of the EU is the right to the freedom of movement of persons. The

Treaty of Rome, known today as the EC Treaty, established this right and it remains

today as a way to create a common market of workers within the EU.36 The freedom of

movement of persons allows for the free entry, residence and exit of citizens of EU

34 Euronews, Labor Mobility in the EU: Eurobarometer Survey, 1, July 26, 2010,http://www.euronews.net/2010/07/26/labour-mobility-in-the-eu-eurobarometer-survey.35

Id.36

Tim Birtwistle, Principles of European Law93 (3rd

ed. Liverpool Academic Press 2002) (2002).


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member states moving between other EU member states.37 Today, under the EC

Treaty, the concept of the free movement of persons includes the free movement of

workers.38

The free movement of workers allows EU citizens to seek employment in other

EU member states, to work in those states without the need for a work permit, to reside

in other member states for the purposes of employment and to allow EU citizens to

continue to live in their adopted member state even after their employment has

ceased.39 The concept of the free movement of workers essentially allows so called

migrant workers, meaning EU citizens who leave one EU member state for the

purposes of employment in another EU member state, to enjoy the same equal access

and treatment as host country nationals with regards to employment opportunities,

working conditions, tax and social advantages.40

The European Commission emphasizes that citizens who make use of their

fundamental right to freedom of movement are contributing to the creation of a truly

European labor market.41 This statement is true, however, there are both legal and

administrative obstacles that prevent workers from engaging in geographic mobility.42

Essentially, EU law applies whenever a EU citizen exercises their right to work in

another member state. Although the EC Treaty did not define the term worker, the

European Court of Justice (ECJ) has interpreted it to mean any person who (i)

37Id.38 EC Treaty, supra, at 51.39Id.40Id.41

European Commission, Free Movement of Workers: Achieving the Full Benefits and Potential,3,http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52002DC0694:EN:NOT.42

Id.


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undertakes genuine and effective work (ii) under the direction of someone else (iii) for

which he is paid.43 Since this definition interprets the concept of free movement, it must

not be at all restrictive.44 That is why Directive 2004/38/EC abolished the previous

requirement for work permits.45

Furthermore, EU law also upholds the principle of non-discrimination under EEC

Regulation 1612/68.46 This means that migrant workers must have the same

opportunities as nationals in terms of access to employment, work conditions and any

other employment related advantages.47 Occasionally however, linguistic requirements

may be a condition of employment as long as they are reasonable and employers do

not use them intentionally to exclude migrant workers.48

With regard to professional qualifications, a system that allows for mutual

recognition is in place, however, it imposes some restrictions.49 An EU citizen who is

fully licensed to practice a certain profession in their home member state will be allowed

to practice in another member state, however they may be required to undergo a period

of adaptation or take an aptitude test.50

Due to the pending reforms to the pension system in Greece, another area of

concern for the EU is social security. Current EU law allows for the coordination of

social security between member states, however, it does not require integration which

allows the member states to structure their social security systems as needed.51 This

43Id. at 544 Case C-53/81, D.M. Levin v Staatssecretaris van Justitie, 1982 E.C.R. I-1035.45 Council Directive 2004/38, 2004 O.J. (L 229) 2 (EC).46 Council Regulation 1612/68, 1968 O.J. (L 257) 2 (EEC).47Id.48European Commission, supra,at 7.49

Id.50

Id.51

Id. at 10.


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has made this particular area of EU law very complex. Even though Regulation 1408/71

attempts to establish some guiding principles to protect workers who choose to exercise

their right to freedom of movement, obstacles remain due to the differences between

the social security systems of member states.52 These obstacles tend to mostly affect

citizens who move relatively frequently.53

Even though EU law has attempted to embrace the concept of free movement for

its citizens, some challenging obstacles remain not only legally but socially as well.

From a legal standpoint further simplification of current law and the reduction of

formalities will aid citizens by giving them more freedom to exercise their rights and will

also make the process of administration easier for authorities.

IV. PROPOSED POLICIES AND LEGISLATIVE REFORMS IN GREECE

Apart from the funds that Greece received from the Eurozone and the IMF, the

Greek government has undertaken initiatives to address its economic crisis, which

include austerity measures and structural reform.54 These measures include spending

cuts primarily in the public sector, increasing taxes and increasing enforcement on tax

and social security contribution tax evasion.55

The new Papandreou56 government that came into office in late 2009 has

proposed several austerity packages in an attempt to aggressively curb the national

52Id. at 11.53 European Commission, supra, at 11.54

Nelson, supra, at 8.55

Id.56

Georgios A. Papandreou is Greeces current Prime Minister and Minister for Foreign Affairs.


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deficit from 13.6% of GDP in 2009 to below 3% by 2014.57 The government hoped that

after several rounds of tax increases and cuts in spending, investor confidence would

restore. However, this was not the case and outside assistance from the Eurozone and

IMF became a necessity.58 Along with assistance from the Eurozone and the IMF came

heightened requests for additional austerity measures. Therefore, on May 6, 2010, the

Greek government held an emotionally charged and controversial vote to approve the

latest round of austerity measures.59

The Greek governments new fiscal plan involves dramatic spending cuts to its

public spending. The plan includes a freeze on civil service pensions, wages, and

bonuses and a civil service hiring freeze in 2010 with a 5:1 retirement to recruitment

ratio for new public sector hires from 2011.60 In addition, the plan involves increasing

the age of retirement from the age of 61 to 65 and changing the calculation of pensions,

basing them on recent earnings as opposed to lifetime contributions.61

These plans have already made an impact on the labor market. First, many

young Greeks have or are considering migrating to other countries.62 In fact, thousands

have applied to migrate abroad, most of them being young, well-educated Greeks.63

Furthermore, in March 2010, EL.STAT, the Greek statistical authority, reported an

11.6% unemployment rate, of which 29.8% belongs to the 15-24 age group, and 15.4%

57 Nelson, supra, at 8.58Id.59Id.60Id.61

Hellenic Republic Ministry of Finance,Announcement: Legislation for the Reform of the Public PensionSystem, July 7, 2010, http://www.minfin.gr/portal/en/resource/contentObject/id/e766e1e9-a929-42ca-a938-771060adf244.62

Smith, supra, at 1.63

Id. at 2.


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belongs to the 25-35 age group with the majority of the latter being college graduates.64

This signifies that almost half of those unemployed in Greece are under the age of 36.

Second, Salaries for first year public sector employees are expected to be under 600

Euros (U.S. $740) a month, according to new legislation that is designed to save 40

billion Euros over three years.65 Such bleak figures continue to promote the

development of the brain drain phenomenon.

Brain drain usually occurs when highly qualified workers migrate to other

countries, which bodes implications for both the sending and receiving nations.66

Estimates suggest that over the last decade, 550,000 Greeks have relocated to foreign

countries after completing their studies.67 In addition, most recent figures rank Greece

14th in demand for EU employment with 7,849 applications for employment within the

EU being filed by Greeks.68 This means that many highly educated Greeks will end up

in other EU countries due to their close proximity to Greece.

The initial effects of such a brain drain will mean that Greece will loose a portion

of its vocational elite, which can create a void that will hamper the development and well

being of the country.69 Additionally, if such emigration continues labor shortages in

some sectors can create labor market bottlenecks, which will have the result of

64Hellenic Statistical Authority (EL.STAT), Labor Force Survey: March 2010, 1, 3,

http://www.statistics.gr/portal/page/portal/ESYE/PAGE-themes?p_param=A0101&r_param=SJO02&y_param=2010_04&mytabs=0.65

Athanasiadis, supra, at 1.66 Simon Hartman & Margarita Langthaler, The Race for the Best: A European Perspective on the BrainDrain, European Social Watch Report, 14 (2009) available athttp://www.socialwatch.eu/wcm/brain_drain.html.67 Lina Giannarou, Greek Brain Drain Looming, Kathimerini, June 18, 2010, at 1, available athttp://www.ekathimerini.com/4dcgi/_w_articles_ell_2_18/06/2010_117767.68Id.69

Arno Tanner, Brain Drain and Beyond: Returns and Remittances of Highly Skilled Migrants, GlobalCommission on International Migration Migration Perspectives No. 24, 3 (2005) available atwww.gcim.org/.../Global%20Migration%20Perspectives%20No%2024.pdf.


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artificially inflating wages in affected industries.70 Furthermore, since the majority of the

emigrants are highly educated, Greece will also lose the public funds it invested into the

education of its young graduates who are now seeking employment abroad.71

Although there are several disadvantages associated with a brain drain, there are

also a few advantages. Since Greece has a relatively high unemployment rate at the

moment, having its educated youth work abroad will curb a loss of skills and will

minimize the burden on domestic social security programs.72 Moreover, the migrants

themselves may have the opportunity to enjoy higher incomes and to better utilize their

skills.

73

Receiving or host countries will also experience advantages and disadvantages

associated with Greeces brain drain. The host countries will experience relief from labor

shortages in certain industries and a rise in employment.74 However, there are fears that

migrants will disproportionately place a burden on the hosts social security system as

compared to their tax contributions, will take jobs from the local population and will drive

down wages due to increased competition for a limited number of positions.75

In addition to the looming brain drain, plans to change the pension system in

Greece have already made an impact on the labor market. Since the announcement of

the pension reforms in April 2010, almost 19% of state employees have applied to

resign from positions that they might have otherwise held for life.76 Due to such

70 Heinz, supra, at 28.71Id.72Id. at 29.73Id.74

Id. at 26.75

Id.76

Smith, supra, at 1.


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staggering numbers, the labor minister publicly appealed to government employees to

stay in their posts.77

These reforms have created a great tension between the Government

implementing its austerity measures so that it can meet its debt obligations and the

need to maintain a stable labor force. According to the most recent data available from

the Greek government, it managed to reduce the year-over-year deficit by 45.4%, which

was well over the targeted 39.5% and implemented a Public Finance Management

Framework to oversee and monitor the governments budget.78 Additionally, the Greek

government initiated reforms and restructuring measures to both the private and public

sector pensions systems in an effort to ensure their long-term sustainability.79

Although these reforms have made positive economic impacts, the social

impacts have not been as beneficial. Unions have rejected the reforms on the grounds

they are unfair and unconstitutional.80 In an attempt to support their position, the unions

have called for workers to strike in protest, creating a showing of labor mobilization.81

Apart from these efforts, the parties mostly affected by the reforms are preparing to

mount a concerted legal challenge.82 However, neither the Greek constitution nor

European directives or conventions have set unequivocal legal guidelines on such

77Idat 1.

78 Hellenic Republic Ministry of Finance, Hellenic Stability and Growth Programme Newsletter, July 23,

2010, 1,http://www.minfin.gr/portal/en/resource/contentObject/contentTypes/genericContentResourceObject,fileResourceObject,arrayOfFileResourceTypeObject/topicNames/stabilityGrowthProgram/resourceRepresentationTemplate/contentObjectListAlternativeTemplate.79Id.80 The Associated Press, Greece Unveils Draft Law on Pension, Labor Reforms,BloombergBusinessweek, June 25, 2010, http://www.businessweek.com/ap/financialnews/D9GIFLBG0.htm.81

Id.82

Dimitris Yiannopoulos, Pension Battle in the Courts?,Athens News, August 2, 2010, 2,http://www.athensnews.gr/articles/13397/04/07/2010/28885.


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controversial issues, but such legal action may influence the current political climate

and force more change.83 Thus, it is imperative that the Greek government takes into

consideration both the economic and social impacts of the crisis to avoid undue unrest

and disturbance to the labor market.

V. BALANCING POSSIBLE REFORMS IN EU LAW AND GREEK

LEGISLATIVE POLICIES

Current EU law is quite unrestrictive as it relates to the freedom of movement of

workers, except regarding some narrow exceptions concerning the recognition of

professional licenses and social security. In light of the current situation in Greece, the

EU does not need to overhaul its current laws however, it may want to consider some

modifications or changes in policy that will work to better handle crisis situations.

According to the International Labour Organization (ILO), in times of financial

crisis it is important to maximize short-term labor market policies.84 This means that the

EU and the Greek government must take into consideration not only economic factors

but labor market adjustment mechanisms as well, before devising a policy response to

the crisis.85 However, due to the severity of the current situation, Greece was forced to

implement several drastic austerity measures in order to deal will its mounting debt.

Even so, news of the greater than expected success of the measures since their

83Id. (Quotation from Yiannis Lyxouriotis, a prominent Greek labor law professor).84 Sandrine Cazes et al., Labour market Policies inTimes of Crisis, International Labour OrganizationEmployment Working Paper No. 35, 2 (2009) available athttp://www.ilo.org/empelm/what/pubs/lang--en/docName--WCMS_114973/index.htm.85

Id.


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implementation, makes it time for the EU and Greece to reconsider the austerity plan so

that the effect on the labor market is minimal.

From the EU perspective, it is important for it to continue to simplify its current

laws and to reduce formalities in order to continue to foster the free movement of

workers. This may require establishing a EU-wide licensing program for professionals

that will allow them to practice their profession in any member state upon passing

certain licensing exams, without the need for a period of adaptation. This will stream line

the licensing requirements so that they do not vary from state to state. Additionally, it

will allow professionals to move freely within the EU without the need for prolonged

periods of adaptation and a broad range of aptitude tests that the member states may

impose.

With regards to social security laws and the EUs involvement, it is important for

member states to remain in control of their social security systems because the

respective governments of the member states are best qualified to maintain their social

security systems in ways that address the needs of their people. However, the EU

would be prudent to set guidelines for the member countries to ensure that the social

security systems of the various member states are at least similar. Although integration

of social security systems is not required under EU law, such guidelines would make it

easier for citizens who wish to exercise their right to free movement to transfer their

social security contributions to the member state in which they reside.

Considering the current Greek debt crisis, it would also be prudent for the EU to

increase its labor market reporting. Utilizing existing services such as the


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Eurobarometer, the EU can survey employers in each member state about the number

of employees they hire from other member states and the reasons for hiring them. Such

information will allow member states to determine the impact of labor mobility on their

economy and to adjust labor market policies as needed.

In addition to possible reforms in the EU regarding the labor market, the Greek

government should also address its own labor market policies. Since the new austerity

measures have made it easier for employers to lay-off employees, the government

should consider implementing subsidies for work-sharing, which is the process of

reducing the number of work hours of an employee thereby eliminating the need to lay

them off.86 These subsidies will allow employees to remain employed while minimizing

unemployment.

In order to ensure the success of a work-sharing program, the government must

assist employers by continuing to allow them to minimize their labor costs by reducing

working hours. Furthermore, to appease employees, the government must provide them

with subsidies to account for the work hours that they will lose from participating in a

work-sharing program.87 Although this program still requires the government to make

pay outs to employees, the pay outs will not financially burden the government as much

as paying full unemployment benefits would.88

The Greek government should also consider lifting its hiring freeze in 2010 in

light of its better than expect financial figures. Even though older public employees may

leave their positions due to pension reforms, if the government lifts the hiring freeze, it

86Id. at 5.

87Id.

88Cazes, supra, at 12.


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will benefit younger workers. The lift on the freeze will allow younger, highly educated

Greeks to take up certain positions and remain in Greece as opposed to seeking

employment in other countries.

Additionally, both the Greek government and the EU should work together to

repair the void between labor demand and supply.89 In a crisis such as the one Greece

is currently facing, it will not be possible to avoid lay-offs. However, even under such

dismal circumstances, the creation of jobs is still evident and thus it is important that

mechanisms are in place to facilitate the match of employees with suitable positions.90

This may require the establishment of domestic and EU-wide programs that assist

citizens with their job search efforts.91

According to the ILO, a job search program is one that improves the chances of

an unemployed person finding a job through such activities as assessment of skills,

counseling, training on presentation and job search strategies and identifying

vacancies.92

Since many currently unemployed Greeks are youth, these programs will

be especially helpful in minimizing long-term unemployment. Furthermore, with EU

involvement and reporting, Greeks seeking employment will be better able to find

available positions in other EU countries and this will lead to greater transparency of

open positions within the EU which will aid labor mobility.

As suggested, many potential solutions exist that will maintain the labor market

even in the midst of the Greek debt crisis. However, in Greeces situation it is important

for policy makers to follow some basic principles no matter which direction they choose

89Id. at 15.90

Id.91

Id.92

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to take. Both the EU and Greek government should consider any current measures and

build on them, pre-determined objectives should align with the policy changes and the

advantages and disadvantages of each proposed policy require analysis.93 With these

guiding principles in mind, both Greece and the EU can emerge from the current

situation and work to establish mechanisms that will avoid another crisis in the future.

VI. CONCLUSION

The Greek debt crisis will affect Greece and the EU in the short and long-term.

However, it is still difficult to predict the exact effects. Although, as suggested in the

paper the effects of the crisis may not all be negative. In fact, the crisis may lead to an

increase in labor mobility in the EU, which will facilitate long-term growth.

Due to the infancy of the crisis, there is currently a lack of statistical data

available. However, this is primarily attributable to the fact that the Greek debt crisis is

so current and it will take some time to gather such data. Even still, it is important for

both Greece and the EU to research the effects of the crisis and to begin to reevaluate

their current laws and legislative policies to curb any potential negative effects om the

labor market, especially in the short-term.

Successful labor-market policies will balance Greeces austerity measures with

labor market demands. Consequently, labor mobility may increase slightly during the

darkest times of the crisis. However, this may not be a negative result. In fact, it will give

highly educated and skilled Greeks the opportunity to develop and utilize their skills in

other markets while the conditions in Greece improve. It will also reduce unemployment

93Cazes, supra, at 21.


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in Greece and will improve the match between labor supply and demand, which is

important for any labor market not just one in the midst of a crisis.

Additionally, if the austerity measures that Greece has implemented continue to

yield better than expected economic results, the government should consider their

revision in order to address the needs of the labor market. For example, lifting hiring

freezes and beginning subsidy programs for work sharing. The institution of such

programs and policies will ensure a balance between economic stability and free

movement of workers by ensuring that labor mobility rates are moderate and do not

place a burden on host or sending nations.

Furthermore, if the EU continues to simplify its laws and reduce formalities it will

be able to better contain the effects of the Greek debt crisis within its borders. In doing

so, the EU will be able to assist its citizens who wish to exercise their right to free

movement for the sake of employment, by minimizing hindrances. Thus, such

movement may alleviate some of the financial pressure on Greece by ensuring that its

citizens can find employment and continue to develop their skills elsewhere without

being a burden on the already fragile social benefits system in Greece.

Nonetheless, the Greek debt crisis does pose many challenges to both the Greek

government and the EU. However, creating a close working relationship between the

EU and its member states, will allow for the sharing of best practices and lessons

learned in order to create a framework that will avert future crises, and will maintain a

solid inter-regional labor market. Finally, creative problem solving and frequent analysis


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of existing policies will ensure that both Greece and the EU will emerge from the crisis

with renewed strength.

Documents

Final Paper - Vanos