GREECE: Government to roll out a Guaranteed Minimum Income scheme

by Vito Laterza | Aug 22, 2015 | News

The new bailout agreement between Greece and international creditors includes plans for a national roll-out of a Guaranteed Minimum Income (GMI).[i] The GMI is not an unconditional basic income for all citizens, but would be the first universal means-tested grant that covers all Greeks below a certain level of income and asset ownership, regardless of employment status, job contract type, professional category, gender or age.

Alexis Tsipras

In the latest round of bailout negotiations, Greek Prime Minister Tsipras reportedly opposed the introduction of the GMI. The final memorandum approved by the Greek parliament last week, however, provides for a national roll-out of the GMI by end of 2016. The government needs to find 0.5% of GDP to finance the national GMI scheme. A draft report from the World Bank published in January this year, provides a core scenario where 1.2 million people would be covered by the GMI – this is constructed on the basic qualifying criteria and payment amounts of a GMI pilot started last year. The measure would cost €980 million or 0.54% of GDP.[ii]

The general wording of the bailout agreement remains vague and the GMI has not yet been approved by parliament. The specifics of implementation will only be known in the next months.

Recent political events are another source of uncertainty. Tsipras resigned on Thursday and called for snap elections, following a rebellion by those opposed to the bailout within the ranks of his party, Syriza. The elections are expected to be held at the end of September. The rebels have formed a new left group which will run under the banner of Popular Unity.

This casts some doubts over the stability of the next government, and might have implications for the bailout implementation. Sources close to the majority line in Syriza stress that, despite the harsh bailout measures, any future government led by Tsipras would be committed to a social agenda that prioritises those who are in most need.

The history of the GMI in Greece

Attempts to introduce a GMI as a basic social safety net for the most vulnerable sectors of society have been made before. In 2000, the centre-left government led by Pasok assessed and then rejected a proposal in favour of this option. Syriza also tabled a legislative proposal to institute a GMI in 2005, without success. In recent times, the GMI has rarely appeared in policy debates, encountering resistance from many quarters. Trade unions and left-wing critics see the GMI as a threat to well established social protection mechanisms for unionised workers, pensioners and their families. From the right, a pro-poor agenda struggled to gain any prominence until the recent economic crisis brought about by the austerity measures of previous bailouts.[iii]

Economist Manos Matsaganis in Greece

The previous coalition government, led by the centre-right party New Democracy in alliance with centre-left Pasok, feebly endorsed a GMI and launched a pilot in November 2014, engineered by the World Bank. The pilot was to be implemented in 13 municipalities across Greece. It’s too early to make final conclusions about it – the new bailout agreement includes provisions for an evaluation of the pilot to be carried out. In a recent academic paper, Matteo Jessoula, Manos Matsaganis and Marcello Natili suggest that there were problems, with little support from central government to the chosen municipalities, and limited capacity from local governments to deliver, resulting in haphazard implementation.[iv] The GMI amount was set at €200 per month for a single person. In a couple, the other spouse was entitled to an additional €100. The monthly sum was increased by €100 for each additional adult dependent and €50 for each minor child. The cash payments would cover the difference between the guaranteed amount and the household’s assessed resources. A couple with two children would fetch up to €400 per month. The GMI also had non-monetary components, including heating allowance, food stamps, and subsidised employment and training programmes.[v]

By the time the GMI pilot was launched, it was strongly opposed by Syriza. Many saw it as a measure instigated by the creditors to justify major cuts in other welfare measures and substantial reductions in wages, while introducing an income floor well below decent living standards. Observers note that the GMI debate rarely hit the spotlight, on either side of the political spectrum, and has been mostly confined to technical discussions among policy experts.

Towards a basic income?

Is the GMI then irrelevant to basic income discussions? Economist Manos Matsaganis, basic income advocate and a pioneer of Greek GMI policy proposals, is not optimistic: “Nobody is really discussing this at the moment, either within Syriza or outside. In any case, calling for the introduction of a basic income in Greece under current conditions would not be right. You cannot have a basic income before having a GMI, especially when fiscal constraints are so severe”. Social policy expert Varvara Lalioti is more positive: “There are a number of obstacles to the implementation of GMI, not least the current government’s political scepticism and problems with delivery. A national roll-out of the GMI would be a step in the right direction”.

Syriza demonstration

The controversies around the GMI are symptomatic of the kind of resistance that might be encountered against basic income as well. The key issue seems to be the implementation of a universal mechanism that would substitute to some degree the redistribution of public funds through specific interest groups – for instance workers protected by unions or retired people receiving contributory pensions.

Critics point out that the GMI might constitute a race to the bottom pushed by creditors in order to reduce labour costs and state liabilities. GMI supporters like Varvara Lalioti note that, while government scepticism might be justified, “the GMI would protect those who have no social safety net and no organisations to speak on their behalf. They are among those who have borne the worst effects of the crisis”.

The controversies will no doubt continue in the next months. Basic income activists note that what the GMI might do is put in place the bureaucratic infrastructure needed to deliver a basic income set well above poverty levels. Reflecting the experience of other southern European countries, the Greek welfare state evolved piece-meal and reflects a complex constellation of interest groups. The introduction of a measure that covers people with little or no income from formal labour markets, and who have never worked under job contracts offering significant welfare benefits, is a significant change. It is likely to have important implications for the future of basic income discussions in Greece.

The article benefited from the expert advice of Dr Varvara Lalioti, Professor Manos Matsaganis and Professor Neni Panourgia. Errors are the sole responsibility of the author.

[i] The Memorandum of Understanding underpinning the bailout agreement.

[ii] World Bank. 2015. Ex ante poverty and fiscal evaluation of a guaranteed minimum income programme in Greece. Washington, D.C.: World Bank Group.

[iii] A detailed account of the different positions and criticisms in the Greek GMI debate is offered by Varvara Lalioti’s academic article “The curious case of the Guaranteed Minimum Income (GMI): highlighting Greek ‘exceptionalism’ in a southern European context”, forthcoming in the Journal of European Social Policy. An earlier version is available online here.

[iv] Matteo Jessoula, Manos Matsaganis and Marcello Natili. 2015. “Strengthening minimum protection in southern and eastern Europe? Pressures from within and from beyond”. 22^nd International Conference of Europeanists, Paris, 8 July. Abstract available.

[v] Hellenic Parliament – Parliamentary Budget Office. 2014. Minimum Income Schemes in European Union and Greece: a Comparative Analysis.