SYRIZA's Policy Reversal on Guaranteed Minimum Income

General rules versus particularistic favouritism: SYRIZA’s policy reversal on Guaranteed Minimum Income. Antigone Lyberaki Panteion University and LSE 1. Introduction This paper seeks to explore and understand how a radical party of the Left gradually transformed its agenda in order to approach, and then seize power. In other words, the analysis below asks how and why, rather than changing the rules of the game according to a transformative social agenda, SYRIZA merely took advantage of them in order to get into office and remain there. To do so, I examine this process of transformation by using as an example a concrete policy theme, the Guaranteed Minimum Income, henceforth GMI. The paper purports to show how a mature and well-embedded policy stance was initially tacitly marginalised, subsequently omitted and abandoned and, finally, reversed. Interestingly, GMI was abandoned at a time when all external forces (and domestic policies, too) were more or less favourable to its introduction. The explanation offered is that GMI was a case where particularistic clientelism was confronted with and finally overcame universalistic governance.

2. Background: actual social policy in Greece and the need for real social protection.

2.1. Some Theoretical issues on safety nets Does social policy exist for the benefit of the giver, or the receiver? This is an old question, which can be traced back to the motivations of individual charity: is it for the salvation of the soul of the benefactor or the beneficiary? In modern electoral terms, is its primary purpose the electoral gain of the government or the practical amelioration of the poor? Evidence based governance concerns itself with results – trying to measure and affect outcomes, such as the condition of the poor. This needs to be defined and measured. The alternative is more interested in displaying effort, the largesse of the instigating political party. In that case expenditure is the obvious objective (and there is no need to find other proxy). Turning to instruments, a social safety net is a mechanism that prevents people from being destitute. Even in social protection systems built around individual contributions, such as Bismarckian systems of social insurance, there is a recognised need for some mechanism of last resort protection. The key distinction that this paper will deal with is that between Guaranteed Minimum Income and of a patchwork of particularistic interventions. The distinction of what is GMI is clear in principle: The application of general rules based on clear, measurable and transparent criteria applicable to all; it hails from and applies the universalistic idea of citizenship leading to equal rights for all. This is juxtaposed to particularistic interventions, which address groups of citizens separately and do not commit themselves to equal treatment. Those interventions divide the society and transform each group into potential electoral clients, whose electoral and other support is exchanged for benefits controlled by the State1. In practice the dividing line between the two approaches may not always be clear cut. It is possible to adopt a pragmatic stance, founded on second-best principles, that concedes practical issues in implementing general rules, most frequently due to problems in information. It prioritises some groups either due the existence of better information or due to more pressing need. This approach

1 Basic income uses general and universalistic rules, but avoids a means test. It gives all citizens an unconditional low amount – van Parijs…

proceeds towards GMI in steps by progressively filling gaps in a social safety net and by addressing categories of need separately; it hopes to produce a blanket by patchwork. However, in terms of objectives this approach is clearly distinct from particularism, as it justifies itself as moving towards the general application. Its empirical difference would be apparent by a concern to ground itself in statistical terms, in order to track progress and pinpoint areas where intervention is needed. In other words, the pragmatic policy stance is an example of evidence based governance. The practical delivery problems of safety nets, and a fortiori of GMI, are similar to issues arising in statistical Hypothesis tests: Those have to cope with two types of error: • Type I error: False positives. i.e. people who appear to need it but do not in practice. Systems relying on income declaration for tax have to deal with tax evasion and avoidance. This information management issue swells the fiscal cost and can be prohibitive. It can be met partly by self-selection (public works, coupons etc). It needs the cooperation of tax authorities. • Type II error: False negatives. i.e. real beneficiaries are either excluded or cannot be reached. Stigma or disability are frequently cited as reasons for non-declaration and justify a mechanism for outreach. It needs the cooperation of social policy professionals such as social workers (Banarjee & Duflo, 2011). A frequent practical problem caused by the existence of GMI is the creation of poverty traps. This arises when GMI is generous and/or if a number of uncoordinated benefits are based on the same qualifying condition. For instance if a number of social benefits are predicated on the status of being unemployed, then losing that status may make someone worse off in total – implying very large effective tax rates around that point. Many systems deal with that problem by making benefits available to working people (for Making Work Pay see EU Commission, 2005, for the poverty traps as side-effects of Minimum Income Systems, see Barr 2012). Cyclicality. Social safety nets have distinct roles to play during generalised recessions and in what may be considered ‘good times’. In good times the general population can fend for itself – generally through employment. Low unemployment means that benefits are shared out through the population. In familial systems this means that if some member of the family is employed, then the family is covered. Safety nets have to address what are the ‘hard cases’, which frequently necessitate individualised delivery and support structures, most frequently by professional social workers. Conversely, in recessions need becomes generalised and safety nets need to be accessed by all. Reaction does not need to be individualised, but should provide a type of springboard – a leg up in hard times so that misfortune does not build up into permanent scarring. In other words, in crises there is greater need for cash-based benefits that are delivered quickly, to a wide group of the population but most frequently for a limited time.

The characteristics of the Greek Welfare State Greece is an example of the Mediterranean Welfare State. Its exceptionally fragmented system combined high expenditure with low effectiveness2, because it had always been geared to financing and preserving privileges – largely of the public sector and insiders. When considerably larger funds were fueled in social protection, these financed more of the same, with little change in structure either to cover new risks or to improve governance and delivery mechanisms. Partly as a result, it never operated as a formal safety net. Residual demands and increased needs were ipso facto met by the family and by informal networks (Lyberaki & Tinios, 2014). Reforms stalled repeatedly on pension issues and did not proceed further (Tinios, 2012 in book Pagoulatos

2 Greece scores poorly both in terms of efficiency and in terms of equity dimensions, in the Sapir classification of European welfare states (Sapir 2006).

ed.). This left most social protection functions to be addressed by the family. Table 1 charts some milestones in the Greek approach to poverty-alleviation policy. Combatting poverty was always a feature of rhetoric, as a general political objective. It was used as a general justification for the large rises in minimum pensions (between 1978 and 1985) and for similarly large rises in minimum pay and in labour protection legislation in the same period. However, this general aim was never given a quantitative or operational dimension. The study of poverty was the exclusive preserve of academic papers employing mostly the Household Expenditure Survey (Sarris & Zografakis, 2000, Tsakloglou refs). So, when in 1992, Minimum Resources protection was mentioned as an EC policy recommendation, this was easily shrugged off as having no practical implications, given that no poverty measurement or monitoring existed. Poverty was a loose ‘catch all’ concept applied to all and sundry. Rhetoric (and expenditure) could proceed independently of what the actual situation was. This situation was challenged from two directions: on the policy front, Costas Simitis, prior to being elected as PM, mentioned the creation of a New Welfare State which would be built around the notion of targeting and prioritisation (Simitis 1995). This idea was put in practice in the early months of his government, overcoming considerable opposition, in one of his first initiatives in the social field, the introduction of EKAS as GMI substitute for pensioners and the elderly poor. On the field of indicators, the introduction of the ECHP by the European Commission in 1996 implied that the concept of poverty could be operationalised and given a quantitative dimension. The existence of the ECHP (subsequently replaced by EU-SILC) meant that outcome indicators could be used for the first time in social policy. This was formalised in the context of the OMC and meant two things: First, that performance and efficiency could be measured. And second, that “helping the poor” could be given a precise and quantifiable content. From the first publication of comparable data Greece was placed in the defensive, as it invariably topped the list of high poverty countries; even more damning, given the spending emphasis, was the concentration of poverty among the old. Social transfers had extremely limited effectiveness against poverty. That period also saw the correction of social expenditure data. Up until 1998 the ESSPROS system consistently ranked Greece as that EU country spending least in social policy. This gave a convenient and complacent excuse for social problems – social policy was ineffective because it was underfunded. However, in 1998, a re-evaluation by the Statistical service showed that social expenditure was underestimated by a figure approaching 50%3. This should have meant alarm bells to ring: it proved that ineffectiveness of social expenditure was greater by half. However, that message was twisted: Governments prided themselves in spending more or less the same percentage of GDP for social policy as the other European peers (and greater than those of the South). This allowed them to bask in showing effort, whilst at the same time ignoring that the ostensible reason for this expenditure was missed by a large margin. Recapitulating, for the policy background before the crisis and before SYRIZA came to office: Poverty was not a visible issue for policy-makers. Even after some discussion was introduced externally in the 1990s, the main emphasis remained squarely in the domain of policy effort (funds directed to social inclusion) rather than outcomes, in the form poverty reduction. Actual expenditure continued to be planned and decided on particularistic, categorical criteria independent of any measurement of need.

Table 1 Poverty and social safety nets Year Description Gradual introduction of social-insurance based social protection Social systems on particularistic criteria insurance 1962 Farmers’ pensions introduced on universalistic principles

3 Instead of the reported 16,8 for 1998 the true figure was 23,8% (NSSG 1999)

system is built Family benefits on universalistic principles (through OGA) up 1982 Pensions for indigent uninsured old people equal to OGA Rhetoric 1978-85 Increases in minimum pensions and minimum wages justified as without poverty measures. No poverty information exists measurement 1992 EC Recommendation on Sufficient Resources 1995 Simitis: New Welfare State 1996-1998 ECHP leads to widely available comparable poverty data on a Europe-wide basis. Greece tops EU list as having the worst poverty problem and the one where transfers are least successful. Poverty enters 1996 Introduction of EKAS as first means-tested safety net benefit for policy radar. pensioners Safety nets as 1998 Revision of Social Expenditure statistics reveals expenditure is in a target practice 50% higher.

2001 OMC on social inclusion: 1st NAPIncl– Government needs to spell Pragmatic out anti- poverty policy approach? 2002 Attempt to extend means testing to family benefits deemed unconstitutional 2003 2nd NAPIncl: states that GMI is the target, but proceeds with careful steps – patchwork fills out blanket 2004-9 OMC action plans maintain previous policy. Expansion in generosity of EKAS 2005 EU-SILC data indicate that old age poverty is beginning to recede ND 2009 Large rises in pensions and minimum wage following December 2008 riots 2009 2020 poverty targets submitted to EU but never revised. 2009 One-off Social Dividend to pensioners - only first instalment 0.5 billion euros, paid out 2010 First MoU – requirement to introduce Social Safety Net by September 2010 Crisis 2012 Family benefits and large family benefits, heating benefit means 2009-2014 tested, long-term unemployment benefit (extension of coverage: longer period, but with stricter criteria) 2014 Samaras governments gives one-off social dividend to pensioners. Nov 2014 Pilot GMI in 13 Municipalities introduced in collaboration with the World bank. Pensioners excluded. September Thessaloniki programme abandons GMI; talks of ‘humanitarian 2014 crisis’, prioritises employment creation and wage increases. January Elections; formation of Government; GMI not mentioned in 2015 programme statement. March 2015 “Humanitarian crisis” law. Electricity, housing, food subsidies (200 million) SYRIZA May 2015 GMI pilot ends; plans for evaluation shelved 2015- July 2015 Commission President suggests EKAS should be incorporated in general safety net; Gov’t interprets as abolition and cited as referendum reason. August GMI included as a requirement in the 3rd MoU. To be introduced 2015 ‘by …’ New SYRIZA government passes parallel programme; ignores GMI obligation.

GMI and the crisis: At the beginning of the crisis, Greece had no safety net. In the preceding high growth period, expenditure growth was allocated to existing programmes and was not used to set new ones,

despite the post-OMC acknowledgments that safety nets were a policy target. In the high growth- high unemployment period, the family was expected to fend for its unemployed members. The arrival of the crisis changed this state of affairs radically. The Troika perceived from the very beginning that a safety net was urgently required. The introduction of a safety net was mentioned as an obligation of the government ‘by September 2010’. The then Minister of Labour, L. Katseli, did not act on this, but concentrated on delaying implementation of labour flexibility measures, as a substitute. After considerable delays and procrastination, and the involvement of the World Bank as a technical advisor, GMI was finally introduced as a Pilot project at the end of 2014 (four years after the first MoU and in the closing weeks of the ND-PASOK government. It was to run for six months in 13 municipalities (chosen most likely on electoral criteria) and excluded pensioners. During the crisis years, social expenditure as a percentage of GDP increased from 26% in 2008 to 31% in 2012 – note: the GDP shrunk (Eurostat/ESPROSS: European System of Integrated Social Protection Statistics). Means-tested social expenditure declined slightly and remained around 2%, while other program countries marked significant increases (notably Portugal and also Cyprus). In terms of effectiveness, social transfers in Greece managed in 2014 to reduce poverty by 4% (while in Ireland poverty reduction after social transfers was 24%, in Cyprus 10% and in Portugal 7%). The following Figures display the broader picture of pre-crisis and during the crisis social expenditure, by function in per capita (to avoid confusion caused by GDP trends). Figure 1 includes also the other “Program Countries”, in order to put the Greek case into context. Social spending in more detail (and in comparative perspective) can be found in Figures in appendix.

Figure 1: Social expenditure, euro per inhabitant Social expenditure by function, per capita (in euro) 12,000 Social benefits Sickness / healthcare Old age and survivors

10,000 2461

8,000 2265 2034 6,000 5849 3978 4,000 1456 2803 3315 2507 1930 3114 2428 1712 1816 2062 2188 2218 1685 1281 2,000 1218 1594 1915 1214 1171 1047 1072 1390 2663 1505 2762 1361 1294 1396 734 1201 1920 1192 0 602 539 339 725 914 420 936 499 776 1041 513 IE GR CY PT IE GR CY PT IE GR CY PT IE GR CY PT

2002 2007 2009 2012 Source: Eurostat/ESPROSS: European System of Integrated Social Protection Statistics

SYRIZA and GMI: from opposition to government SYRIZA in opposition: SYRIZA is descended from the old euro-communist left. Its forerunner, SYNASPISMOS (Coalition of Left and Progressive Forces) was formed the weeks of the Berlin wall demolition. So, SYRIZA is not, in principle, hostage to older fixations plaguing the left in Greece over the last half century. In that “modern” political party, belief in GMI was one of its most prominent recommendations in social policy. SYNASPISMOS (when under the presidency of Konstantopoulos) repeatedly in the

1990s tabled parliamentary questions lambasting low social expenditure; the rejoinder was always ‘why not institute GMI’.4 The formation of SYRIZA by amalgamating a number of left wing groups did not affect its preference for GMI. Indeed, in the first national election it fought in 2007, GMI was a part of the electoral platform. It was used as an indicator of the radical transformation that was key to its message. Its advocacy of GMI, however, was not accompanied by specific critique of how social expenditure was spent on other priorities; GMI would apparently be a net addition without affecting existing beneficiaries. As SYRIZA gradually approached power, its original clear view on rebalancing social expenditure was progressively watered down. In the 2009 election, GMI was still on the election platform. It remained there even when it was poised to become the second largest party and the official opposition in 2012. This commitment had disappeared by the elections of January 2015. It was replaced by addressing what was termed “the humanitarian crisis”. This was the main slogan initially formulated in the “Thessaloniki Program” and then utilised in the pre- and the post- 2015 election. That was never described in any detail, was not based on indicators and had no concrete justification of needs and their prioritisation. It was meant to talk to each and every voter, regardless of his/her own specifics. During the election campaign, but also during the post-election parliamentary debates, SYRIZA not only abandoned its position in favour of GMI, but actually framed and presented its program to address the humanitarian crisis as a superior alternative to GMI. This could have been only a tacit abandonment, in order not to disturb potential supporters and recipients of old-style categorical benefits, who might have worried that their benefits would be reduced or, worse still been subjected to general rules. SYRIZA in January 2015 headed a coalition government with ANEL, a party that had never expressed any preference for social experimentation. However, social policy was firmly in the portfolios of its own ministers. The expiration of the GMI in the first half of the year would have proved an ideal opportunity to put its own stamp on social policy by finally instituting a left wing policy that had consistently been in its agenda from 2006 to 2012. However, the Government showed in every possible way that the abandonment of GMI was not a tactical move, but instead was a major strategic shift.

4 In early statements – Matsaganis 1999, a change in the balance of social expenditure away from old age and towards GMI was clearly signalled. In later pronouncements it was not clear whether GMI would affect existing programmes.

During the parliamentary debates on the law on the ‘humanitarian crisis’, SYRIZA ministers left no doubt about their hostility to GMI as a point of principle. In the discussion held in Parliament, Minister Fotiou stressed repeatedly the suspect nature of the GMI concept, its inadequacy for Greece and the primary focus of SYRIZA-ANEL Government in favour of mobilizing all available

SYRIZA PARLIAMENTARY STATEMENTS ON THE GMI (Parliament 2015) Minister Theano Fotiou on 2/04/15 «Let us examine what is the meaning of the GMI and let us see how Law 4093, a memorandum-derived piece of legislation, forced the country to introduce the Guaranteed Minimum Income (renamed Minimum Social Income – as if it were not the minimum minimorum supplying at most 400 euros for a family of four- a euphemism at best.» What is really wrong with GMI: its level (ungenerous and inadequate), but also the obligation to introduce it as a Memorandum directive. However, there were also practical difficulties: Citing civil servants the Minister mentioned a ‘problematic legal framework’, operational difficulties, low staffing, inadequate number of social workers, no interconnection between public bodies and information systems. The Minister concluded, «full evaluation will be completed in due course. However, the GMI .. has to be sufficient for dignity.... The core problem is that the GMI may prove to be a poverty trap. This is even more dangerous in the case of Greece because unemployment is very high, tax evasion is pervasive and undocumented (shadow) employment is very common. ... Poverty trap is what actually happened in African countries when the IMF moved in with similar policy prescriptions, whereby people were stuck below poverty levels». Minister Rania Antonopoulou (3/5 2015). “the logic of GMI is flawed, because it replaces social benefits while containing their cost. The hidden agenda of the Troika is to force Greece to shift the emphasis of social policy away from inequalities in favour of poverty management ... The solution for families living below the poverty threshold is not the GMI. To ensure that these families gain access to dignified income, the government needs to legislate a substantial increase in minimum wages (at pre-crisis levels), strengthening the workers’ side in collective negotiations and policies to offer jobs to those who have not». resources to strengthen employment rather than to the social safety net. The question of how to deal with vulnerable groups incapable of being drawn into paid work was left conspicuously unanswered. GMI returned after the insistence of the “Institutions” (a shortcut for lenders) once again as an obligation explicitly mentioned in the MoU passed in August 2015 and which SYRIZA was pledged to implement in the elections of September 2015. The MoU returns to safety nets and the GMI as key objectives “A fairer society will require that Greece improves the design of its welfare system, so that there is a genuine social safety net”. More specifically the package of measures of the ‘humanitarian crisis’ can stand, but must be supplemented by a complete overhaul of the system. A prior action is a comprehensive Social Welfare Review, after which, plans must be submitted for a gradual nationwide rollout of guaranteed minimum income ‘to start by April 2016 and be complete by end-2016’. (Tinios 2015) Despite this clear commitment, the new SYRIZA government was not in a hurry to proceed to GMI. Nothing has been heard from the GMI evaluation, nor from the Social Welfare Review. In contrast, a new set of social measures similar in principle to the humanitarian crisis measures were passed as a parallel programme in early 2016 – partly to deflect criticism from the pension reform. The involvement of the World Bank and the availability of a working pilot prototype meant that the rejection of GMI by SYRIZA could not, as previously, be justified as a second best move. The Simitis Government had not proceeded with GMI, but explicitly set out a strategy of keeping to it as the ultimate objective, approach to which would be achieved through pragmatic steps. All SYRIZA had to do, to implement its original 2012 campaign pledge was to adopt the World Bank working model. By the rules of revealed preference, by not choosing something that was feasible,

it conclusively signalled it did not prefer it. In order to abandon GMI as a target it would have to repudiate as such, and not merely sidestep it as not currently feasible. Indeed, the arguments offered by SYRIZA rejected the notion of GMI, going well beyond citing its current impracticality. This overview has shown that SYRIZA from being an enthusiastic supporter of GMI, originally watered it down, then omitted, and finally conclusively abandoned it. It did so in favour of categorical benefit policies and an approach to poverty stressing (a) pensions and minimum pensions (b) employment and (c) raising the minimum wage. It is hostile to GMI as something taking away from more immediate priorities, but possibly also as bad in itself.

A short history of GMI Pilot in Greece The Pilot GMI was applied to 13 municipalities (Drama, Edessa, Grevena, Ioannina, Karditsa, Lefkada, Mesologgi, Halkida, Kallithea/Athens, Tripoli, Samos and Malevisio/Crete); the selection was never justified. The Ministerial Decision) was signed with great delay (from 2012 to late autumn 2014). GMI Pilot kicked-off date in 15 November 2014, through to 15 March 2015. During the 6-month period, 29,000 applications (out of a potential population that has never been approximated) led to 13.000 approvals. Average household size was 1.8 persons. 25% were female-headed h/h, 8% singe-parent. Total financial outlays were 11 million euros by beginning of April 2015 (3 million before SYRIZA took office and the rest after). The evaluation procedure envisaged 5 municipalities to be evaluated by the Word Bank, and 8 by the Ministry of Labour and Social Solidarity (the National Institute for Labour and Human Resources –EIEAD). The criteria for the evaluation process were the following: a. effectiveness, b. implementation procedures, c. operational readiness of the administrative machinery, d. readiness of state ITC systems, e. social and economic impact on the population. And f. sustainability, operationality and credibility in order to roll-out on a national level. As of March 2016, the evaluation procedure has yet to start. A call for tender was issued by the World Bank in early 2015, but it is still pending. Nothing is known about the internal evaluation by EIEAD.

3. Justifying SYRIZA’s U-turn SYRIZA’s repudiation of GMI was more than a “turn to pragmatism” –i.e. the rearrangement of priorities (in the name of “realism”) when parties adapt to office. The rejection was justified in no uncertain terms as hostility to the notion and application of the GMI Greece. This about-turn, whilst keeping to a strident poverty rhetoric, could be and was justified, by their own argumentation, by four arguments: i. The nature of poverty in Greece: According to SYRIZA, poverty is the result of unemployment, of low minimum wages and of weak employment protection legislation (EPL). It is for this reason, instead of addressing poverty and vulnerability directly, SYRIZA prioritises job creation (in the “social economy”). ii. The GMI can set in operation a poverty trap, inhibiting people to raise above poverty levels. iii. Pensions act as a de facto safety net, allowing the transfer of funds from grandparents to unemployed children and grandchildren. Therefore, pensions must remain the main vehicle for social transfers, in preference to other measures dedicated to non- elderly vulnerable groups directly. iv. Undocumented work in the shadow economy makes it impossible to measure real incomes. This leads to policies that abandon the idea of common criteria for all and prefer using narrow categories and specific groups. Instead of proposing a generalised safety net as a benefit of the last resort, SYRIZA argues directly for an employer of the Last Resort, that is the State. That is seen as the only appropriate tool to lift people out of poverty and give the necessary boost to the economy (March 2016, Papadimitriou + FES + INE/GSEE for the core arguments). This is the seamless continuation of the

“Response to the Humanitarian Crisis” Bill: A patchwork of cash transfers for consumption, housing and electricity bills must serve as a safety back up;5 the real job however is undertaken by public sector hiring –in various forms. This policy stance is little more than a reiteration in the new fiscal environment of the traditional position of piecemeal action to specific groups plus the promise of (politically selective) public hiring. Are these arguments valid, or are they ex-post justifications of decisions taken on political criteria? The answer depends on the characteristics of poverty in Greece and its links to the crisis.

Figure 2: Poverty rate and reduction in poverty risk (in pp), after social benefit Poverty reduction (in pp) after social benefits 60 Poverty rate (%) (60% on median income)

50 Poverty reduction (in pp) after social benefits

40 13 5 7 30 4 58 56 6 4 5 6 3 3 4 20 42 42 2 34 32 29 30 27 10 21 20 20 22 23 21 15

0 2007 2010 2014 2003 2007 2010 2014 2003 2003 2007 2010 2014 2003 2007 2010 2014 Total Persons aged 65+ Hholds (persons 18-59 + Two adults with dependent children), three or more with low work intensity * dependent children Source: Eurostat based on EU-SILC data. Notes: (1) The work intensity of a household is the ratio of the total number of months that all working-age household members have worked during the reference year and the total months the members could have worked in the same period. Persons living in households with low work intensity are defined as the number of persons living in a household having a work intensity between 0.20 and 0.45. (2) Eurostat does not provide estimates on the poverty rate before social transfers by work intensity of the household.

A. Poverty 6 years into the crisis? Incomes in Greece collapsed during the crisis – real GDP per head falling 26.3%. This drop was similar across income groups, implying that relative poverty, measured in comparison to incomes of the middle individual, changed far less dramatically. A recent publication of the Bank of Greece (BoG, 2016) uses EU-SILC 2014 (referring to the situation in 2013) to suggest for the first time a levelling off in poverty risk (the at-risk-of-poverty indicator reached 22.1% compared to 23.1% in the previous year). This is still very high by EU standards (EU average 17.2%, GR 3rd from the bottom).6 Income inequality remained stable over the last 3 years. Some groups did better than others. Most notably pensioners faired considerably better than the average, their poverty risk dropping by a third during the crisis. In contrast, worsening access to the labour market means that poverty rose considerably for families with children7. Figure 2 shows that the situation became dramatically worse for those people who stood to gain more from the

5 Report of the Governor of the Bank of Greece, 2015, page 116, and footnote 46 6 Similar levelling trend was marked in the depth of poverty (the gap between the poor’s income and the poverty threshold) in 2013 compared to 2012 (EU-SILC 2014), while these trends are also corroborated by Household Expenditure Survey HES (BoG, 2016: Governor’s Report for 2015). 7 We also know that although some vulnerable groups saw their relative position improving (single-parent families with children, elderly pensioners), other groups became more vulnerable (foreign born/immigrants, unemployed men and families with dependent children – BoG 2016.

introduction of GMI, and considerably better for those relying on pensions. An impartial observer could not but treat the picture as a powerful argument for the introduction of GMI and not for its abandonment. Figure 2 shows what a little effect on poverty have social transfers in Greece (and on older people poverty in particular). B. Unemployment and the dysfunctional labour market. As shown in Tables below, unemployment increased dramatically, and has become one of the main drivers of poverty. Interestingly, targeting of the unemployment benefits remains unsatisfactory –even after the extension of coverage for the long-term unemployed and tightening of the criteria of eligibility. Income from pensions for households with at least one unemployed person is more important for the non-poor than for the poor.

C. Pensions. It is crucial to stress that minimum pensions together with EKAS are higher than the minimum wage in Greece. This is the result of smaller reductions in low pensions together with the relaxation of eligibility criteria for EKAS. As shown in Tables below, pensions represent a significant share of total income in all households, primarily so for the non-poor. During the crisis, pensions’ role in sustaining family income increased considerably for non-poor households. The opposite occurred in poor households. This trend is clear regardless of the poverty threshold. These findings should not be seen as surprising, given that the share of persons living in a household with at least one pensioner is much higher among the non-poor (52.5%) than the poor (33.0%).

D. The shadow economy and extensive undeclared work fuel vulnerability and raise de facto obstacles to measuring real needs (and hence undermine the introduction of GMI). SYRIZA uses this to justify strengthening collective bargaining, EPL and raising the minimum wage as more effective anti-poverty policies. However, this logic stands reality on its head: heavy labour market regulation is responsible for undeclared work, and the same is true for high taxation, high social security contributions, high minimum wages and over-regulation in product and service markets (Lyberaki, Meguir & Nikolitsa, 2016). The way to go about it is to liberalise and unify the rules for insiders and outsiders; not to widen the gap between them (Boeri, 2014; Gete & Porchia, 2012; Eichhorst et al, 2013 and C. Tealdi on Single Labour Contract). Moreover, it is unclear what has happened to non-declared income during the crisis: Tax collection and verification mechanisms were supposedly improved; the use of electronic means of payment, especially after 2015, has worked in the same direction. On the other hand, liquidity squeezes imply that small business firms rely on cash where they can – as non-declaration is an obvious step to economise liquidity.

E. The poverty trap issue is an inherent problem of income-tested benefits (Barr, 2012 Chapter 8) regarding implicit tax rates and their negative effect on the incentives to get a job. However, its applicability in Greece is severely limited: hardly any benefits predicate receipt on income or employment status; citing a poverty trap betrays a lack of appreciation of Greek conditions and how benefits work. Even so, GMI would most likely be designed as a fixed period award. Getting a job within that fixed period would not affect eligibility for the benefit. Fixed period awards enable the poor to raise their income more easily and the tendency for families to be trapped in poverty becomes less acute. Furthermore, labour supply incentives may be improved. A reality check and a thought experiment Some of the issues raised against GMI can be empirically examined by looking at data before and after the crisis from the EU-SILC, a widely used sample survey covering income and living conditions (and on which poverty data are based). The essence of the case for using pensions as an anti-poverty instrument, is that Greek families are such that it is easier to target poverty through pensions, rather than directly through, say, unemployment benefits. Tables 2 and 3 examine these alternative targeting

10 mechanisms in order to form an opinion about the relative efficacy of pensions or unemployment benefits either complemented by means-testing or not, in the case of Greece, before (2008) and after/during the crisis (2013). The tables are distinguished according to poverty status (headline and extreme) and show a number of indicators that allow judgement to be made. Even a first glance at the data reveals that pensions are far inferior than unemployment status: • Pensions are a high percentage of household income, but mainly through the large number of exclusively pensioner households. They are less important when we look at households containing no pensioners, and even more so, unemployed. The difference in h/h incomes between poor and non-poor h/h is very small (20.9 to 18). • Targeting efficacy has been reduced considerably during the crisis. Targeting pensions will “waste” more money now than in 2008. • In contrast, unemployment as a targeting characteristic has become much more salient. The low proportion of household income attributed to UB, is due both to the low level of benefits and in its extremely limited coverage. Nevertheless the difference between poor and non- poor in targeting, is of the order to 3 to 1. • When we focus on extreme poverty proxied by the 40% median poverty threshold, the superiority of unemployment increases considerably.

So, Appendix 1 takes the argument a stage further and conducts, as a reality check a thought experiment. We use SILC data to contrast giving the same amount to pensioners and the unemployed, with or without a means-test. Here it is confirmed that transferring equal amounts of money to pensioners and to the unemployed living in poor households has the same impact on poverty reduction but the cost is 4 times higher. In addition, both targeting type errors are eliminated if transfer is made directly to the unemployed (compared to using the pensioners as intermediaries). So, the expectation created by Tables 2 and 3 is easily confirmed. Targeting the unemployed directly is much cheaper and more efficacious than going indirectly through pensions. If you are worried about grand-daughters, it is much easier to address them directly, rather than asking their grannies to act as intermediaries. The SYRIZA argument collapses before the evidence.

T Table 2: Targeting poverty by different instruments: Comparing Pensions with Unemployment in 2008 and 2013: Pensions Greece, 60% poverty threshold 2008 2013 Change (2008-2013) in pp Household level analysis Non-Poor Poor Total Non-Poor Poor Total Non-Poor Poor Total

‘Headline poverty’ 60% Median Poverty Threshold Share (%) of pensions to total hhold income -all households, mean value 30.0 36.8 31.5 41.5 31.1 39.3 11.5 -5.7 7.8 Share (%) of pensions to total hhold income - hholds with at least one person aged 18-59, mean value 14.7 16.4 15.0 20.8 17.0 19.9 6.2 0.6 4.9 Proportion (%) of hholds with >50% share of pensions to total hhold income -hholds with at least one person aged 18-59 12.7 16.0 13.3 20.9 18.0 20.2 8.2 2.0 6.9 Proportion (%) of hholds with at least one person aged 18-59 –all households 78.1 69.0 76.1 70.4 79.3 72.4 -7.6 10.3 -3.7 ‘Extreme poverty’ 40% Median Poverty Threshold Share (%) of pensions to total hhold income -all households, mean value 31.5 31.2 31.5 41.8 16.4 39.7 10.3 -14.8 8.2 Share (%) of pensions to total hhold income - hholds with at least one person aged 18-59, mean value 14.9 16.0 15.0 21.3 10.3 19.9 6.4 -5.7 4.9 Proportion (%) of hholds with >50% share of pensions to total hhold income -hholds with at least one person aged 18-59 13.0 17.1 13.3 21.5 10.9 20.2 8.5 -6.2 6.9 Proportion (%) of hholds with at least one person aged 18-59 –all households 76.2 74.4 76.1 70.5 89.8 72.4 -5.8 15.3 -3.7 Source: EU-SILC 2008 and 2013, own estimat Table 3 Targeting poverty by different instruments: Comparing Pensions with Unemployment in 2008 and 2013: Unemployment Greece, 60% poverty threshold 2008 2013 Change (2008-2013) in pp Non- Household level analysis Poor Poor Total Non-Poor Poor Total Non-Poor Poor Total

‘Headline poverty’ 60% Median Poverty Threshold

Proportion (%) of hholds with at least one unemployed - all households 8.3 12.5 9.2 19.5 48.9 25.8 11.2 36.4 16.6 Proportion (%) of hholds who receive unemployment benefits -hholds with at least one unemployed person 17.7 10.8 15.7 21.1 18.8 20.2 3.5 8.0 4.5 Share (%) of pensions to total hhold income -hholds with at least one unemployed 22.9 24.7 23.5 27.3 19.4 24.1 4.3 -5.3 0.6 Share (%) of unemployment benefits to total hhold income -hholds with at least one unemployed 2.4 4.9 3.2 5.2 13.3 8.5 2.8 8.4 5.4 ‘Extreme poverty’ 40% Median Poverty Threshold Proportion (%) of hholds with at least one unemployed - all households 8.5 17.9 9.2 21.9 61.8 25.8 13.4 43.9 16.6 Proportion (%) of hholds who receive unemployment benefits -hholds with at least one unemployed person 16.4 11.0 15.7 20.2 20.0 20.2 3.8 9.0 4.5 Share (%) of pensions to total hhold income -hholds with at least one unemployed 22.9 26.7 23.5 27.9 11.6 24.1 5.0 -15.1 0.6 Share (%) of unemployment benefits to total hhold income -hholds with at least one unemployed 2.4 7.6 3.2 6.1 16.5 8.5 3.6 9.0 5.4 Source: EU-SILC,

4. Interpreting the paradox and conclusions. In conclusion, the official justifications for the turn of SYRIZA are essentially a fig leaf. They must be a pretext to rationalise some more fundamental policy shift. This can only be a choice to remain within the confines of traditional clientelistic politics and practices as applied in Greece by both mainstream governing parties since 1974. Interestingly, this policy turn was not dictated by fiscal tightness, nor by strict conditionality imposed by the lenders. In this sense, it is a unique example of a Left Party, abandoning its own social policy headline, while everybody else was becoming aware of its necessity. Seen in terms of social policy, the clientelistic logic reverses the logic of evidence-based governance. That starts by examining what are the characteristics of poverty and then attempts to ameliorate it. In contrast, SYRIZA appeared first to have chosen what to do on political grounds. Having decided what to do, it then tried to justify its choice by twisting the representation of poverty and its dynamics. Evidence has to fit to the policy and not the other way round. We can see this mechanism most clearly in the targeting of pensions. A ‘traditional’ stance to protect pensions and to ignore structural changes to social policy, such as GMI, was first adopted. This required a dramatization of old age poverty and stressing that pensions are a panacea for all social ills. The fact that the opposite has actually taken place did not deter policy makers at all. As shown above, giving the same amount to every unemployed person (which, in practice, means filling the gaps of social protection and providing fundamental unemployment assistance) is both cheaper and much more effective as a poverty alleviation strategy. Yet, SYRIZA kept talking as if old age vulnerability were the main issue. In this way, as has always happened, protecting pensions leads to hypothecating of funds to exclude other of non-old age expenditure. The Prime Minister and the Minister of Finance like to repeat that ‘We should not cut pensions, as grandmothers give pocket money to their unemployed grandchildren’. This is rather disingenuous as an argument against GMI for two reasons: Firstly, in order for pensions to be paid, grandchildren have to have jobs. Secondly, if one wants to support grandchildren, it is unclear why you cannot give the money directly to the unemployed, rather than entrusting their grandparents to act as middlemen. Only very socially conservative views can deny that helping the unemployed directly would be the first best. So, SYRIZA by entering government has not only turned its back on their old agenda, it seemed to have implicitly taken on an especially socially conservative stance.

The above discussion was about a Left Party, which, on its move closer to office, came face to face with the clientelistic state machinery. Confronted with the dilemma to try and demolish it, or to appropriate it, it chose the latter. This choice dictated the abandonment of its previous rhetoric favouring social transformation through the application of universalistic general rights. This was replaced by the prioritisation of particularistic interests of an entrenched clientele, much as previous parties in government had done before it. But what really pushed SYRIZA to make such a choice? One can only formulate hypotheses to address this question. It could be hypothesised, for instance, that in view of the fiscal tightness, there was little option for SYRIZA to create a new clientelistic base for itself. The only “currency” available was defending the already granted privileges. This was not a completely novel attitude for SYRIZA: it fitted well with an electoral strategy of co-opting groups, which had previously had clientelistic-type understanding with the older mainstream parties (chiefly, though not exclusively, PASOK). This is borne out by the co-opting of trade union and political cadres from older parties, as well as by defending syndicalist rights and collective bargaining. Old pressure groups found in SYRIZA a willing and sometimes enthusiastic champion.

To implement this policy somersault, SYRIZA politicians made heavy use of the anti-poverty rhetoric (combatting unemployment and defending the income of the elderly). They did so, however, in a manner that obscured the real issues. The policy shift could be described as moving from evidence-based governance, to governance-based evidence (and rhetoric). Sadly, the trigger for this metamorphosis seems to be inertia rather than external pressures.

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Appendix 1: A thought EXPERIMENT based on Alternative Scenaria If the objective is to reduce poverty in Greece while the recession is still unfolding, is it better to do so via the pensions system (i.e. give money to the grandparents to give to their unemployed children and grandchildren) or is it better to target the unemployed directly? To address this question, a thought experiment has been set up, using EU-SILC 2013 data, in which two poverty alleviation strategies are compared and contrasted: the first uses the pensions system and the second targets the unemployed directly. Variance in the scenaria involves greater selectivity. In the first strategy in this experiment, you give 100 euro to every pensioner. Alternatively, to every pensioner whose pension is below 600 euros. In a third variant, the 100 euros go only to pensioners living in poor households. The alternative scenario (the second) involves giving direct payment of 100 euros to every unemployed person. The variant is every unemployed person living in a poor household. Table A1 displays the cost of the two strategies and their variants. Table A2 presents type 1 and type 2 errors in these strategies, while Table A3 shows the effect of the alternative anti-poverty strategies on the depth of poverty. Given the previous statistical analysis, the following results should not come as a surprise: 1. Giving 100 euro to every pensioner is more expensive, even if the transfer is limited to low pensions (below 600 euro). 2. Of the various policies, means-testing eliminating type-1 errors (leakage to non-poor) and type-2 error (non-take up, poor do not receive) are much lower in the case where the transfer goes directly to the unemployed. 3. Increasing unemployment beneft/the unemployment targeting option has the biggest decrease of the 18-64 age group poverty threshold. The poverty rate of the unemployed is reduced by a quarter, while in the pensions option it is barely touched. 4. Finally, the depth of poverty is more affected by directly targeting the unemployed.

Table A1: Cost of different anti-poverty strategies Beneficiar of Annual ies poor Cost (in Million # Total ) EUR) Ratio: Policy Measures (1) (2) (3) billion(4) (3) / (1)

Policy 1: Emphasis on the pensioners Scenario 1a: Give EUR 100 to every pensioner 2,6 0.3 4.4 3.2 1.71 Scenario 1b: Give EUR 100 to every pensioner with monthly pension income less than EUR 600 1,3 0.2 2.3 1.6 1.74 Scenario 1c: Give EUR 100 to every pensioner who lives within a poor hhold 0.3 0.3 0.7 0.4 2.04 Policy 2: Emphasis on the unemployed Scenario 2a: Give EUR 100 to every unemployed 1.5 0.7 3.1 1,8 2.16 Scenario 2b: Give EUR 100 to every unemployed who lives within a poor hhold 0.7 0.7 1.2 0.8 1.83 Source: EU-SILC 2013, own estimates.

Table A2: A primary assessment of the Two Errors of Targeting Poor Non-Poor who do not who who do who receive the receive the not (%) of two receive transfer transfer receive errors of the (TYPE 1 (TYPE 2 the targeting Policy Measures transfer error) error) transfer (TYPE 1 + 2) Scenario 1a: Give EUR 100 to every pensioner 7.4 15.0 40.7 36.9 55.7 Scenario 1b: Give EUR 100 to every pensioner with monthly pension income less than EUR 600 5.3 17.1 19.7 57.9 36.7 Scenario 1c: Give EUR 100 to every pensioner who lives within a poor hhold 7.4 15.0 0.0 77.6 15.0

Scenario 2a: Give EUR 100 to every unemployed 13.2 9.3 20.8 56.8 30.1 Scenario 2b: Give EUR 100 to every unemployed who lives within a poor hhold 13.2 9.3 0.0 77.6 9.3 Source: EU-SILC 2013, own estimates.

Table 3: The effect of the alternative scenario on poverty rate Poverty rate (%) based on the 60% threshold Policy Measures Total 18-64 65+ Unemployed Baseline -current situation 22.4 24.8 15.1 45.7

Scenario 1a: Give EUR 100 to every pensioner 19.4 23.3 7.5 42.5 Scenario 1b: Give EUR 100 to every pensioner with monthly pension income less than EUR 600 20.9 24.3 10.2 45.1 Scenario 1c: Give EUR 100 to every pensioner who lives within a poor hhold 19.4 23.3 7.5 42.5

Scenario 2a: Give EUR 100 to every unemployed 19.3 21.1 13.8 34.6 Scenario 2b: Give EUR 100 to every unemployed who lives within a poor hhold 19.3 21.1 13.8 34.6 Source: EU-SILC 2013, own estimates.

>>> policy 1a and 2b have the same impact on poverty reduction ; albeit policy 1a cost 4 times more than policy 2b

Table A3: The effect of the alternative scenario on the relative median poverty gap (%) Relative Median Poverty Gap (%) based on the 60% threshold Policy Measures Total 18-64 65+ Unemployed Baseline -current situation 30.8 34.8 14.5 42.4

Scenario 1a: Give EUR 100 to every pensioner 32.0 34.5 17.4 43.1 Scenario 1b: Give EUR 100 to every pensioner with monthly pension income less than EUR 600 31.5 34.0 15.5 41.4 Scenario 1c: Give EUR 100 to every pensioner who lives within a poor hhold 32.0 34.5 17.4 43.1

Scenario 2a: Give EUR 100 to every unemployed 26.6 31.6 13.6 32.5 Scenario 2b: Give EUR 100 to every unemployed who lives within a poor hhold 26.6 31.6 13.6 32.5 Source: EU-SILC 2013, own estimates.