THE GREEK cabinet has resolved to make deep cuts to public wages and pensions and put as many as 30,000 civil servants on notice to ensure the release the €8 billion loan it needs to avoid default next month.
After two nights of talks with the EU/IMF “troika”, the government agreed a swingeing acceleration of its contentious austerity programme as it battles to convince its sponsors that it will make good on its promises.
The new measures, which are certain to aggravate tension within the administration led by prime minister George Papandreou, are still subject to the troika’s final approval in a series of meetings next week in Athens.
Formal talks with senior inspectors from the EU Commission, the International Monetary Fund and European Central Bank, were suspended three weeks ago when a dispute erupted over the measures required to bring the country’s rescue programme back on track.
It took two separate teleconferences with the troika on Monday and Tuesday to agree outline terms for the new austerity drive.
There is concern in Europe that Mr Papandreou’s government could collapse under the weight of the measures. With the rescue programme marred by a litany of broken promises since the country’s bailout was agreed 16 months ago, observers, officials and diplomatic circles are expecting trouble as Mr Papandreou tries to execute the new plan.
The measures signed off yesterday during an hours-long cabinet meeting include a 20 per cent cut in pensions exceeding € 1,200 a month. Pensioners under the age of 55 face a 40 per cent reduction in the sum exceeding €1,000 which they receive in their monthly package. Some 30,000 public workers will be compelled to join a “labour reserve” in which their pay will be cut by 40 per cent as they seek other jobs in the state system. They will lose their jobs if they do not find an alternative appointment within 12 months.
In addition, the government has pledged to extend by at least one year until 2014 a new property tax. Athens had hoped the tax would raise an additional €2 billion a year, but the troika said it would raise no more than €1 billion.
In a bid to curb evasion, this tax will be levied as an additional charge in the monthly electricity bill sent to Greek households. However, the country’s main electricity union has been threatening to sabotage the initiative by telling its members not to co-operate.
Separately, the two biggest Greek unions declared plans for a wave of strikes next month. As the government met yesterday, protesters gathered around parliament in downtown Athens.
In advance of yesterday’s cabinet meeting, Greek minister for finance Evangelos Venizelos said he accepted that the country’s public finances would have gone further off the rails without the troika’s oversight.
“If it weren’t for the troika’s control . . . unfortunately we would have derailed fiscally,” Mr Venizelos told MPs.
“Do we need to take additional measures? Yes, we need to take additional measures.”
Although Mr Venizelos said Greece needed the support of its international sponsors, he also said the EU had failed to manage the debt crisis as decisively and quickly as required.
A team of EU Commission officials in Athens will monitor the execution of the plan. They are examining how the country’s porous tax collection system can be improved.
