Greece: Court rules cut to civil servants' lump sum benefits is constitutional

The Greek Supreme Administrative Court has ruled that cuts to a teacher's lump sum benefit (payable to public servants on retirement) were not illegal. The teacher had claimed the 34.27% reduction imposed as part of financial austerity measures was unconstitutional. The judgement has yet to be published but will now apply in similar cases before lower courts.

Under a royal decree dating from 1936, the lump sum benefit is paid to public sector employees who are dismissed or who retire. The provisions stipulate that the benefit is paid to retired public servants from the Public Servants’ Welfare Fund (TPDY) (in Greek) on the basis of compulsory monthly contributions of 4% of basic salary paid throughout the public servant’s years of service. The level of the benefit thus depends on the employee’s basic salary and on the number of years of employment. However, all the reserves of the TPDY had been exhausted by 2008, making it  impossible to pay lump sum benefits, which created a backlog of claims. 

After the country entered the European Financial Stability Mechanism (EFSM) in 2010, the TPDY received €1.4 billion from the first and second memoranda to meet the backlog. While at the same time, cuts were being made to the level of payments including those of pending claims, in particular, on the basis of the provisions of Law 4024/2011 (Pension arrangements, unified pay scale and grading system, labour reserve and other provisions implementing the Medium-term Fiscal Strategy Framework for 2012–2015) and Law 4093/2012 (Approval of the Medium-term Fiscal Strategy Framework 2013–2016 – Urgent Measures for the Implementation of Law 4046/2012 and the Medium-term Fiscal Strategy Framework 2013–2016), reducing lump sum benefits by 34.27% overall. This reduction was applied retrospectively and applied to retirees who had submitted their applications before the laws in question were published.

The retired teacher petitioning the court alleged that the 34.27% reduction made to her lump sum benefit under these laws was illegal. Her claim argued that the reduction contravened a number of national and international legal provisions, including Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms, and to the constitutional principle of equality – the decision violating the citizen’s legitimate expectations of the administrative authorities. The teacher’s application was heard before a plenary session of the Supreme Administrative Court  on 9 May 2014. 

The TPDY argued that it was necessary for the government to intervene to secure the survival of the fund, as without retrospective cuts the fund would become insolvent, making it impossible to make lump sum payments to future public sector retirees. A judgement (as yet unpublished) was handed down which, according to official information, rejected the arguments of the retired teacher – the court ruling that cuts to the lump sum benefit of public servants are constitutional. This judgment creates a legal precedent that predetermines judgments to be made by lower courts in which similar applications are pending.