Economic Crisis and Administrative Adjustments (Reforms) in Ireland and Greece

  • Konstantinos KougiasEmail author
Living reference work entry
DOI: https://doi.org/10.1007/978-3-319-31816-5_4128-1
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Synonyms

Definition

An administrative reform is a conscious, well-considered change that is carried out in a public sector organization or system for the purpose of changing both (a) the structure and procedures of the public bureaucracy, and (b) the attitudes and behavior of the public bureaucrats, in order to promote organization effectiveness and attain national development goals.

Introduction

The global financial and economic crisis, followed by fiscal crisis, led many European Union’s (EU) governments to plan and implement austerity measures in order to cope with the concurrent problems of lower revenues and high public deficit and debt. Some euro area member states received external financial assistance on condition of severe austerity and reform programs. Economic adjustment programs involve three types of conditionality: fiscal measures aimed at reducing public debts and deficits; financial measures to restore the health of the financial sector; and structural reforms to enhance competitiveness.

This entry analyzes the impact of the Eurozone crisis on European bureaucracies, namely Ireland and Greece. The recent scholarly research has explored the crisis effects on public administration but empirical studies are still few in number and are focused on West European countries such as Britain, Germany and the Netherlands (Kickert 2012) or on clusters of European bureaucracies such as the Southern European administrations (Sotiropoulos 2015). However, less attention has been devoted to the interplay among administrative capacities and external forces in explaining the outcomes and evolution of reform patterns within the group of countries that were so severely hit by the crisis that they had to be bailed out.

With the purpose of addressing this gap, the entry carries out explanatory and exploratory research by focusing on the policy mix that has been adopted in response to the crisis and tries to empirically measure its impact on public administration. What is the impact of the reform programs on the performance of public administration, both in quantitative and qualitative terms? And moreover what explains changes and continuities in the Irish and Greek public administrations and government structures after 2010? These questions form one core argument, suggesting that the scale of fiscal crisis and changes in public administration do not necessarily go hand in hand. Fiscal crisis interacts with reform design and in-built restrictions, setting the limits of the administrative change.

The rest of the entry is structured as follows: In the first section the study summarizes the characteristics of the Irish and Greek public bureaucracy, then it is discussed the changes in public administration that had already started to unfold before the onset of the crisis. The second section provides an overview of the measures that were included in the policy programs of the crisis period. It is argued that, despite the fact that the origins of the economic crisis were different in the two cases under study, the responses to the crisis, as far as administrative reform was concerned, namely an intensification of post-NPM reforms, were similar. In the fourth section, the main findings are critically discussed, and certain explanatory variables are suggested. The contribution to the current debate is then outlined.

Trajectories of Administrative Reform Before the Economic Crisis

The introduction of the Strategic Management Initiative (SMI) in 1994 was a critical juncture in the modern phase of public service reform in Ireland (Boyle 2016a). The SMI promoted public sector reform with an emphasis on the delivery of a quality service to the public, while new practices in respect of financial reporting, human recourses, and customer service were introduced (OECD 2008:77). Although SMI emerged from within the civil service itself and received initial political support, it was never fully embraced by successive governments and its implementation was limited on all the conventional measures. At the end of the Celtic Tiger era, public-sector bodies, staff numbers, and pay in the public service had increased significantly (Boyle 2016a).

On the eve of the crisis, the Irish government was handed the final report of a study on the Irish public service it had commissioned the Organization for Economic Co-operation and Development (OECD) to undertake (OECD 2008). The OECD report, titled Ireland: Towards an Integrated Public Service, acknowledged that since the early 1990s, “Ireland has significantly advanced along a ‘NPM’ continuum” (OECD 2008:18), but also found considerable scope for improvement (OECD 2008). The onset of the financial crisis caught Ireland with an administrative system characterized by organizational fragmentation and complexity and a weaken political authority to control the size and cost of the public service.

In Greece, the current governance model was established in the 1970s following the country’s transition to democracy. The transition to democracy lasted until the late-1980s and was characterized by a series of institutional reforms. The purpose of the reforms was to strengthen the rule of law and the Weberian aspects of state operation, serve the values of integrity, and enhance the reliability of the political-administrative system (Spanou and Sotiropoulos 2011:725). In the 1990s the Economic Monetary Union (EMU) and Maastricht criteria shifted the political agenda and created windows of opportunity for economic and managerial reforms. Europeanization pressures and neo-liberal ideas to some extent influenced the “modernization” period 1996–2004, yet economic and managerial reforms were less visible and observed particularly in policy areas related to economic competition, opening up the market, and reducing the size of public sector, thus affecting the scope of state intervention more than the administrative apparatus as such (Spanou and Sotiropoulos 2011). Despite the establishment of agencies and the introduction of management by objectives and performance management during the “modernization” period, the politicization of the public administration, the indifference, and the low prioritization weakened reform momentum. Change was incremental and followed preestablished paths (Spanou and Sotiropoulos 2011).

The Different Origins of Economic Crisis

When the crisis erupted, the fiscal condition in the two countries was characterized by ongoing deficits, rising government debt, deficits in account balances, and high borrowing. The Irish crisis was a case of a busted property bubble that has created big problems in the banking system. The general government deficit rose to 7.3% in 2008 and climbed to 31.2% in 2010 as a result of bank recapitalization. The state bailed out the busted banks and took on debts it could not sustain (public debt at the start of 2008 was 27.5%, by the end of 2010 it stood at almost 110%). In Greece, structural reforms remained timid during the first decade of the 2000s, while the sovereign debt increased. As a result, Greece had proven unable to manage its soaring public debt (129% of GDP in 2009) and by then almost chronic budget deficit (reaching 14.9% of GDP in 2008).

Both countries soon saw their fiscal situation deteriorating and applied for a bailout agreement. These agreements were officially embedded in Memoranda of Understanding (MoU) and were negotiated between national governments and the “Troika,” consisting of the European Commission, the European Central Bank, and the IMF. In April 2010 the Greek authorities, the EFSF and the IMF representatives signed the first MoU for a loan agreement of €110 billion. Shortly afterwards two other bailout programs were signed in 2012 and 2015 of €130 and €86 billion, respectively, as the situation proved to be economically unsustainable. Ireland implemented a single financial assistance program (titled the “National Recovery Plan”) which began in November 2010 (€85 billion) and lasted, till the end of 2013.

MoUs linked policy conditionality with the payout of successive loan tranches. Along with drastic fiscal consolidation, a key element of the MoUs was the urgent reform of public administration and the modernization of its regulatory system (Spanou 2015:32). In stark contrast, the Irish MoU hardly mentioned public administration reform (European Economy 2011). Rather, it focused on macrolevel targets for public service numbers and structural reforms to particular sheltered sectors.

Similar Policy Mix

The Irish government followed the unilateral way of action in the first round of spending cuts in the public sector in the budgets for 2009 and 2010. However, this pattern has changed after 2010, as in the Croke Park Agreement and its successors (Haddington Road and Lansdowne Road Agreements), the government and the Public Service Union have agreed on a series of pay and productivity measures to be implemented in the Public Service. In Greece, following the example of the other Southern European countries, the government decided unilaterally on major policy issues, such as civil service salary levels and the hiring or dismissal of public employees.

The decision making and implementation processes took place in a top-down manner. In Ireland, the Economic Management Council (EMC) managed reforms related to the troika loan program and provided faster executive decision-making (MacCarthaigh 2017:151), while the creation of the Department of Public Expenditure and Reform (DPER) increased fiscal discipline and strengthened the central control over the bureaucracy. In Greece, the “summit,” namely a small circle of decision-makers around the PM, became a strong coordination mechanism because it was itself closely monitored by the Troika (Sotiropoulos, 2015:240). Moreover, in order to assist Greece in the implementation of reforms, the first MoU provided for the creation of a “Task Force for Greece” (TFGR).

The reform policy mix in both countries consisted of measures that are classified in three broad categories covering: organizational structures, procedures, and the civil service.

In relation to the structures and the organizational aspects of public administration, the reform included reorganization of ministries and other public entities, the closing and merging of public bodies, the reduction of units, and the reform of local government. In Ireland, the creation of a new Ministry (DPER) represented a major departure in Irish administrative history (MacCarthaigh 2017:146). Apart from assuming responsibility for public sector reform, industrial relations, and expenditure management, the DPER has been responsible for the development of two public service reform plans. Moreover, a Cabinet subcommittee on public sector reform was created, chaired by the PM, to review progress on the implementation of the reform plan (Boyle 2016a). In Greece, the General Secretariat of Coordination has been created, and together with the General Secretariat of the PM and the General Secretariat of Government it was supposed to achieve better interministerial coordination (Spanou 2015:40).

In both countries, public entities at the central and/or local level were restructured, merged, and/or abolished. At the national sublevel, a notable decrease in the number of municipalities and local authorities has occurred in both countries (MacCarthaigh 2015; Sotiropoulos 2015).

Measures aimed to strengthen the financial management for better monitoring of public expenditure, improve the operational efficiency of the public sector, and re-organize revenue administration were adopted. Both countries increased top-down procedures in budget preparation and introduced a long-term economic and fiscal framework (Spanou 2015; MacCarthaigh 2017). Steps were taken towards the use of Information and Communication Technologies (ICT) tools, E-government, and transparency portals.

Both countries introduced a series of civil service reforms to improve the operational capacity of the administrative apparatus affecting at the same time the status of public sector employees. National governments have made spending cuts the main plank of their fiscal stabilization measures. This has been addressed through seeking to reduce numbers in employment (recruitment embargo on new entrants, as well as incentivized early retirement schemes) and by straightforward cuts to nominal pay rates and to social welfare payments. New procedures have been initiated, regarding the selection of senior officers (Spanou 2015; MacCarthaigh 2015).

In summary, reforms were almost exclusively based on post-NPM ideas. Nevertheless, as the following evidence indicates, the extent to which each country followed the same road differed.

The Impact of the Reform Programs

Both countries experienced an improvement on the financial indicators of the public sector. Over the period 2010–2018, government expenditure has decreased, revenues have increased, and government borrowing has notably dropped (% GDP).

Between 2010 and 2013, the personnel of the public administration decreased in absolute numbers in both countries. From its peak in 2008, the total number of people employed in the Irish public service dropped from 320,000 to 288,000 in 2013. In 2018, the number of employed people in the public service rose to 323,000 (Boyle 2018). In Greece, between 2010 and 2014, the total number of people employed in the public service dropped from 835,000 to 599,000. In 2018, the number of people employed in the public service was 676,000. Recent increases in both cases have shown a susceptibility to popular pressures. Agency governance followed the path of downsizing and restructuring. As at the end of 2015 in Ireland there were 257 national noncommercial agencies, down from 294 in 2010 (62 agencies were terminated since 2010 [though only 10 ceased to exist altogether] and 25 new agencies created of which 11 are completely new) (Boyle 2016b). At the same period in Greece, 31 public bodies were closed, and 157 legal entities merged (Spanou 2015).

Turning to government capacity and performance, the entry relies on indicators namely the WB Governance Indicators and the Bertelsmann Stiftung Sustainable Governance Indicators (SGI). The selected datasets aim to provide some indication on the development of key administrative variables, not a precise assessment, also taking into account margins of error when making comparisons across countries.

The first set includes three WBG indicators: Government Effectiveness, Regulatory Quality, and Rule of Law. These variables are associated with the capacity of the government to effectively formulate and implement sound policies and are linked with the goals of the adjustment/reform programs, such as effectiveness and better regulation. Ireland scores reasonably well and has improved its performance over the period 2010–2015. Since then, it is observed a downward trend, more acute in the area of rule of law implying that the issues of simplifying the complex stock of legislation and oversight which were identified before the crisis (OECD 2010:14–15) remain. On the other hand, Greece recorded the highest fall in all three areas. Government effectiveness has not really improved, despite technical assistance offered by TFGR (Sotiropoulos 2018). The same pattern is observed in the indicator concerning regulatory quality, while a notable decline took place regarding country’s score on rule of law suggesting legal formalism and complexity of legislation.

The different performance is also confirmed in the set of indicators on the executive capacity of the quality of governance (Bertelsmann Stiftung SGI) which explores the extent to which a country’s institutional arrangements enhance the public sector’s capacity to act. Both countries have improved their performance regarding Implementation although to a different extent, while the Inter-ministerial Coordination which was already high in the case of Ireland has been improved in Greece. This probably relates to the already mentioned tendency of centralization of the co-ordination mechanisms in recent years, which is also reflected in countries’ better performance relating to Strategic Planning.

Discussion

Examining the outcomes of the reform programs several similarities and divergences can be identified. Similarities are more obvious in the cases of cost-saving measures such as rationalization of public sector organizations, improvement of regulatory capacities, shared services, performance budgeting, procurement procedures, and greater mobility of personnel across the public service.

Notable differences exist in the pace, depth, and duration of the initiated reforms. In the Greek case, the impressive list of detailed administrative reforms has not resulted in a paradigm shift for the Greek political-administrative system (Ladi 2014) but rather middle-level policy change (Featherstone 2015). Evaluation reports indicate that the initial goals were not fully achieved and a gap between programmatic statements and actual results remains. Moreover, Greece recorded the larger degree of fiscal adjustment and at the same time the largest deterioration rate in the WBG index, which could imply a reverse relationship between the intensity of the fiscal measures and the quality of governance.

In Ireland, the crisis provided a “window of opportunity” to policy entrepreneurs to address new but also long-standing policy problems related to public service reform (MacCarthaigh 2017:150). Administrative reforms were more intense and fewer deviations and discontinuities between established provisions and achieved results were observed. The 2011–2016 period became one of unprecedented change for the Irish public service (MacCarthaigh 2017:162). Nevertheless significant challenges still remain mainly in the area of delivery of improved outcomes, reform dividend, and openness and accountability (Boyle 2016a:143). In the next section, the entry examines possible explanations and offers a few conclusions.

Explanatory Factors

Success or failure in the implementation of reforms seems to revolve around the alchemy of a small number of ingredients: fiscal pressures, reform agenda, reform capacity, external constraint, coordination mechanisms, ownership, and internal politics. The next section proceeds by considering each of these ingredients in turn.

Fiscal Pressures

The austerity policy in Greece affected economic growth more strongly as stricter austerity targets were imposed. The fiscal multiplier, which correlates public demand with economic growth, was higher – and was underestimated by the forecasters (Domnick and Schoenwald 2016:2) – and the program experienced a true collapse in domestic demand. In Ireland the adjustment was based on fairly realistic forecasts (Pisani-Ferry et al. 2013). In this way, the external shocks from the agreement were reduced.

Reform Agenda

In Greece, the reform agenda was admitted as “ambitious,” aiming at a “paradigm change.” Carrying out many simultaneous reforms under hasty and pressing conditions is a considerable challenge which raises questions of relevance and lack of prioritization and produces unintended consequences (Spanou 2018).

In Ireland, many of the reform measures stipulated in the program were taken from the already planned Irish National Recovery Plan (NRP), which meant that the government had already planned significant reforms in great detail (Pisani-Ferry et al. 2013). In this way, domestic actors approached reforms in a less formalistic way avoiding the point of hollowing out initial objectives or even accommodating reversal.

Reform Capacity

The Greek administrative system not only had to cover a great distance but also had to be reformed while in motion and under fiscal stress. Running this reform marathon, the state machine has been deficient in its ability to deliver targeted measures on a set of priorities and according to an agreed schedule (Featherstone 2015). Reform pathologies, which were highly evident before the crisis, have also been present during the adjustment process (Featherstone 2015).

Irish administration worked rather efficiently and implemented the reforms to a great extent as agreed (Pisani-Ferry et al. 2013). The views of public servants on the effects of administrative reforms are revealing. There is a perception that the reforms being put in place are producing benefits with regard to policy effectiveness, policy coherence and coordination, cost and efficiency, external transparency, and openness and ethical behavior (COCOPS 2014:35).

External Constraint

While the level of detail of conditionality in Ireland remained relatively constant during the program period, for Greece, conditionality became much more detailed and specific during the course of the programs as the Troika realized that implementation of conditionality was not working, in part because of the lack of specific guidance to a dysfunctional public administration (Pissani-Ferry et al. 2013).

Ownership and the Politics of Cutback Management

The sense of “ownership” has been a key, intervening variable determining outcomes. Greek governments spent their limited political resources to implement required actions and suffered their own loss of legitimacy (Spanou 2018). In this way, the conditionality strategy was de-legitimized (Featherstone 2015).

In Ireland there has been no immediate politicization of budget decisions along left-right partisan lines (Hardiman 2010). The high degree of compliance of the Irish authorities with the agreed MoU was largely due to the fact that structural reforms drew heavily on the Irish NRP.

Conclusion

The present entry has evaluated administrative reforms that were carried out in Ireland and Greece. Both countries have implemented an impressive fiscal consolidation and have carried out reforms in the size of public employment, the compensation of public employees, financial management systems and budget, and procurement procedures. They proceeded to a “rationalization” of the administrative system’s organizational profile, though the way the two countries have embedded this goal to a systemic plan for reforming public administration is differentiated.

The divergences in the countries’ reform performance suggested that policy conditionality interplays with program design, in-built constraints, setting the boundaries of the conditionality strategy. These have to do with the circumstances under which the policy mix is implemented; performance and policy targets of the program; the volume of the reform agenda; reform capacity; organizational resources; and the ownership of the program and the politics of cutback management.

The scale of fiscal stress is a necessary but not sufficient condition for substantial administrative changes. There is an interplay between external reform pressure and the endogenous administrative dynamics. In Ireland, the crisis provided the basis for a new equilibrium, while in Greece, despite notable changes occurred, no clear shift to a new pattern, can be discerned which implies that the Eurozone crisis, seems to be highly path-dependent.

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Authors and Affiliations

  1. 1.Department of Social PolicyDemocritus University of ThraceAthensGreece