The European Commission has opened a formal investigation under EC Treaty state aid rules into Greece’s proposed financial contribution to the early retirement plan of OTE (Hellenic Telecommunication Organisation).
The Commission believes that the approximately EUR 360 mln offered by the Greek State may exceed what is necessary to relieve OTE of alleged extra costs resulting from higher labour costs due to the quasi-civil-servant status of OTE’s employees.
The opening of an in-depth investigation will allow interested parties to comment on the measures. It does not prejudge the Commission’s final decision.
EU Competition Commissioner Neelie Kroes said: “The Commission favours measures which help former monopolists adapt to a liberalised market environment, provided that they are limited to what is necessary to create a true level playing field.”
Following an agreement between OTE and the trade unions on a voluntary early retirement scheme (VRS), Greece endorsed OTE employees’ rights by law (i.e. immediate pension payments by the public Pension Fund TAP-OTE) and regulated the obligations of OTE and the Greek State to compensate the Fund for the extra costs due to the VRS.
The VRS concerns around 5 500 employees (about one third of OTE’s total work force) and its costs amount to approximately EUR 1 billion. Greece contributes to these costs by transferring 4% of its shares in OTE, worth approximately EUR 360 million, to the Pension Fund. The remaining costs are borne by OTE.
Greece claims that the financial contribution does not constitute state aid, in particular because the financial contribution only relieved OTE from extraordinary charges due to the specific status of OTE employees. As OTE employees cannot be dismissed due to their permanent employment status, OTE put into place a voluntary early retirement scheme which was much costlier than redundancy packages offered in the private sector.
The Commission has doubts that Greece’s financial contribution to the VRS is limited to relieving OTE of extra costs compared to other operators offering redundancy/early retirement schemes to their employees.
Furthermore, OTE may have benefited from other advantages, such as an exemption from unemployment charges or relief from pension obligations, which would neutralise the alleged surcharges. OTE might also derive supplementary benefits from its former monopoly position, in particular with regard to its fixed telecom network.
