Mitsotakis Takes On Greek Bureaucracy

ATHENS – Greek Administrative Reform Minister Kyriakos Mitsotakis, charged with slashing a public workforce bloated with generations of political hires by his New Democracy Conservatives and their coalition partner the PASOK Socialists, said he’s accomplished that mission early, but that a bigger task remains: changing a deeply-dysfunctional bureaucracy.

“The issue of the size of the public sector has been addressed, what remains is the quality of the public sector,” Mitsotakis, a Harvard-educated MBA, told the Wall Street Journal.

Greece’s international lenders, the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) have been pressing for the government to pare the number of workers among hundreds of reforms as well as harsh austerity measures that have worsened a seven-year recession and created record unemployment and deep poverty.

Among their demands has been for Greece to cut the government workforce by at least 150,000 by 2015 through attrition, and to dismiss or transfer tens of thousands more by the end of this year.

As of the end of December, the public sector employed just shy of 636,000 people, according to Mitsotakis, a drop of more than 200,000 since the start of the crisis four years ago. Plans to lay off or transfer more than 20,000 others, are on track, he added – despite pending legal challenges by unions.

Mitsotakis said that means Greece has met its target to slash its bloated public-sector payroll two years ahead of schedule and won’t accept any further demands from its creditors for mass layoffs.

In the Journal interview, he said that letting people go was easy. The hard part, he said, is to cut red tape that stifles investors and motivate workers used to smoking, drinking coffee, sitting around and ignoring people coming in for service.

While he insisted the workforce has been cut enough, some of those let go, especially school guards and municipal police, have continued protests. They were among a slew of lower-paid workers on the firing line while the government didn’t go after higher-paid managers and consultants, or workers critics said rarely – or never – show up and get paid anyway because of political connections.

His assessment could be challenged when Troika envoys come back to Athens, expected this month, to go over unresolved reforms – some under his jurisdiction – as well as how the government plans to close a 2.4 billion euro ($3.29 billion) hole in the 2014 budget without more pay cuts, tax hikes, slashed pensions – or worker firings.

The next review is critical to the release of one of the last installments of $325 billion in two bailouts, needed to meet a bond issue payment in May, and as the rescue monies run out this year, leaving Greece to hope it can get back into the markets after being locked out for four years because of its dire economic straits and stiffing private investors with 74 percent losses.

Apart from cutting the public payroll, Greece reported its first budget surplus in a decade last year—a year ahead of schedule. Economic data later this week are expected to show Greece’s economy shrank less than a forecast 4% in 2013, bolstering Prime Minister Antonis Samaras’ trumpeting that he has put the country on the road to recovery.

If Mitsotakis, 45, succeeds, it could push him into the forefront of a younger generation of potential leaders and separate him from the pack of usual suspects who have mostly been in public service to enrich themselves, a crowd critics said is responsible for the country’s crisis. His sister, Dora Bakoyiani, narrowly missed becoming the head of New Democracy and a potential Premier.

Descended from Eleftherios Venizelos, one of Greece’s greatest statesmen in the early-20th Century, Mitsotakis’ father Constandinos is a former prime minister.

Mitsotakis, who also holds a master’s degree from Stanford University, had been repeatedly passed over for cabinet positions and was seen as something of an outsider in his own party.

When Samaras, who has feuded with both Mitsotakis’s father and sister in the past, offered him the seemingly thankless job of administrative reforms minister, with many political analysts said could have set up him to fail and position him away from any chance of overtaking the Premier for the party leadership one day.

He still has to convince the Troika he’s right about the layoffs because their envoys use different numbers in trying to figure out how many people work for the government, including state enterprises that hadn’t been counted before.

According to its last estimate, Greece had 713,000 government workers at the end of 2012, down 122,000 from the end of 2010. But even using those numbers, Greece has met the 150,000 through attrition target, taking into account the decrease last year, government data show.

Mitsotakis’s plans for the public sector have been well-received by the Troika, something that has reflected well on Greece’s government. His next challenge is to transform an anachronistic and unresponsive bureaucracy.

This week the ministry proposed legislation rewriting the rules for civil-servant evaluations – forcing evaluators to effectively grade on a bell curve to counter past tendencies for everyone to receive high marks.

The legislation sets a quota for failing public servants  – 15% of the workforce –  a radical change in approach from a system widely abused in the past where no one was ever fired or disciplined, even for failing to come work, being insubordinate or just sitting at a desk doing nothing.

“For years everyone knew what was happening in the public sector but no one did anything about it,” he said. “And if everyone gets top marks, then the evaluation process ceases to be an effective tool.”

By May, the government is planning legislation to cut red tape that snarls businesses. A coming report by the Paris-based Organization for Economic Cooperation and Development (OECD) identifies some 4,000 regulations and rules that could be swept away.

But Mitsotakis said that’s not enough and he wants Parliament to end the lifetime job protection for civil servants that is written into Greece’s constitution when talks on constitutional reform begin this year, effectively challenging his own party leader and coalition government that put the workers there in the first place.

The provision was first enshrined in the constitution as far back as 1911 and changing it has long been considered a taboo to even talk about changing it. With such protection, Greek workers can essentially do anything they want without any fear of being disciplined or let go.

“The political system isn’t ready for a change of such magnitude,” he said. But “we are breaking the omerta.”