September 17, 2019

Greeks Move to Slash State Jobs for 30,000

The government also completed a draft budget for 2012, which is expected to be presented in Parliament on Monday and voted on by the end of October, and conceded that it would miss a deficit-reduction target of 7.6 percent of gross domestic product. The deficit is projected to equal 8.5 percent of G.D.P. this year. The deficit shortfall had been expected because of delays in carrying out reforms and a deeper-than-expected recession, with the Greek economy forecast to contract by 5.5 percent this year.

In comments made late on Sunday after a cabinet meeting, a government spokesman, Ilias Mossialos, said Sunday’s deal was the result of “long and difficult negotiations” with foreign auditors and that it constituted the “gentlest possible scenario in terms of social repercussions.”

According to the text of the draft law distributed to the local news media, 30,000 civil servants — or 3 percent of the public work force — would be put on reduced salary by the end of the year. The majority, some 23,000, are at least 60 years old and essentially would be forced into early retirement. The remainder would lose their positions through the merging and abolition of dozens of government agencies. Mr. Mossialos said the plan would save the government some 300 million euros, or $400 million, from the public sector wage bill in 2012.

The Greek government is in a race against time to convince representatives of the European Commission, the European Central Bank and the International Monetary Fund, known as the troika, that it will make good on pledges to put its financial house in order. Without the release of about $11 billion in aid — part of a 110-billion-euro bailout agreement reached last year — Greece could run out of money this month and face a default that would shake the euro zone and global markets.

The decision on whether to release the cash is expected to be made on Oct. 13 at an extraordinary meeting of European finance ministers, but it will depend on the troika officials, currently in Athens, issuing a positive report about Greece’s efforts at fiscal overhaul. A chief source of frustration for foreign auditors has been the delays in carrying out reforms and an apparent reluctance by the government to reduce the country’s public payroll.

There is vehement public opposition to the new reforms, which come after a wave of tax increases and cuts to public sector wages and pensions over the past year. In total, the new measures expect to save nearly $9 billion this year and in 2012.

Civil servants, who have called 24-hour general strikes for Wednesday and Oct. 19, last week blocked several government ministries to prevent the troika officials from collecting data. A sit-in on Friday at the national statistics office, Elstat, prevented the authority from finalizing debt and deficit data for 2010.

There are also rifts within the ranks of the governing Socialist Party. The divisions pose a threat to the administration of Prime Minister George A. Papandreou, which is governing with a fragile majority of four in Greece’s 300-seat Parliament. The government managed to pass a new property tax in Parliament last week, indicating that Mr. Papandreou was still able to rally wavering lawmakers. But the civil servants’ bill might be tougher to pass as it strikes at the heart of the government itself.

Opening Sunday’s cabinet session, Mr. Papandreou indicated that the priority should be guaranteeing Greece’s solvency and position in the euro zone.

“Important decisions, which need to be taken on a European level, depend first and foremost on us,” Mr. Papandreou said. “We need to show we are dedicated to achieving our goals.”

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Greece Nears a Tipping Point in Its Debt Crisis

FRANKFURT — Greek leaders struggled through the weekend to agree to a set of radical budget reductions that would satisfy foreign lenders’ demands even as they tried to stave off mounting resistance to those cuts at home.

Reflecting the urgency of the situation, Prime Minister George A. Papandreou canceled a planned trip to Washington this week and held talks with his cabinet on Sunday.

The Greeks face an October deadline to qualify for 8 billion euros, or $11 billion, in aid, without which Greece will certainly default on its growing debt. Over the weekend, European finance ministers issued stern warnings at a meeting in Poland that failure to meet financial targets would imperil the release of the payment.

The payment is just one installment in a larger package of 110 billion euros in aid agreed to by euro zone members in spring 2010; a second bailout fund, for 109 billion euros, was agreed to in July, though that has yet to be ratified.

To reach the financial targets, Greek leaders discussed a range of draconian layoffs and pay reductions among public sector workers. While these measures have long been planned, but never carried out, to the frustration of foreign lenders, the discussion of these cuts represented a marked change in approach for the Greek government, with the emphasis on reductions over revenue increases.

“Everyone wants a smaller state,” the finance minister, Evangelos Venizelos, said on Sunday.

More specifically, Greece officials are being pressed to put thousands of civil servants deemed to be “surplus” on a standby status at a reduced wage. The government has not yet pushed ahead with this measure, which is very unpopular in a country where nearly one million people out of a population of 11 million work for the government.

Several Greek news media outlets, including the influential center-left newspaper To Vima, on Sunday cited an internal government e-mail that set out priorities by Greece’s foreign creditors aimed at raising much-needed revenue quickly. These include cuts in the pensions of Greek sailors and employees of the state telecommunication company OTE, the immediate merger or abolition of 65 state agencies and the freezing of state workers’ pensions through 2015.

Adding to the Greeks’ dilemma is that the proposed cuts come as the Greek economy is contracting faster than expected. Last week, Mr. Venizelos warned that the economy would shrink much more sharply this year than anticipated — by 5.3 percent instead of the 3.8 percent originally forecast in May. The budget deficit is on track to reach 8.2 percent of gross domestic product this year, well ahead of the original estimate of 7.4 percent.

The original aid package requires Greece to reduce its deficit to 7.5 percent of gross domestic product this year, and below 3 percent by 2014, according to the International Monetary Fund.

The reduced number of workers employed in the public sector would only add to the difficulty of meeting these targets as payroll tax collections shrink.

Despite the dire circumstances, Mr. Venizelos denied rampant speculation that the country was on the brink of default.

Acknowledging that the mood in both Greece and the euro zone is “fluid and nervous,” he said the country was committed to taming its widening budget deficit and carrying out reforms, one of which is a new levy intended to ensure that property owners pay taxes, a persistent problem in a country beset by tax evasion.

Mr. Venizelos said that the government would make the long-delayed cuts to the public sector, though he also lashed out at “those intent on speculating against the euro and carrying out organized attacks on the heart of the euro zone.”

On Monday, Mr. Venizelos will have a chance to make his country’s case in a conference call with representatives of the foreign lenders known as the troika: the European Commission, the European Central Bank and the International Monetary Fund.

Public sector workers in Greece have shown little appetite for the cuts that have already been made, let alone those being proposed. Over the summer, protests have turned violent as workers have bristled at the new austerity measures.

In Germany, the mood seemed to be turning increasingly in favor of letting Greece fail rather than to bear the growing cost.

Wolfgang Schäuble, the German finance minister, repeated warnings that Greece would not receive any more aid unless it kept promises it had made to the International Monetary Fund, the European Commission and the European Central Bank to cut government spending and improve the economy.

“The payments on Greece are contingent on clear conditions,” Mr. Schäuble told the newspaper Bild am Sonntag.

As the largest country in the euro area, which has 17 European Union members, Germany is the biggest contributor to a bailout fund meant to help Greece as well as Portugal and Ireland continue to pay their debts while their economies recover.

Voters in Berlin, at least, did not punish Chancellor Angela Merkel for her handling of the debt crisis. Her Christian Democratic Union gained two percentage points in regional elections on Sunday compared with the last election five years ago, winning 23.4 percent of the vote. The Social Democrats, who have generally been supportive of aid to Greece, remained in power with 28.3 percent.

Support for the Free Democrats, whose leaders have been among the most vocal critics of Greek aid, plunged to 1.8 percent from 7.6 percent in 2006. That is below the 5 percent needed to seat representatives in the state Parliament.

The European Central Bank will also play a role in the decision of whether to continue aid to Greece, and has a strong interest in preventing a Greek default.

The central bank has spent an estimated 40 billion to 50 billion euros buying Greek bonds in an ultimately unsuccessful attempt to hold down the yield, or effective interest rate. It might need to rebuild its capital if those bonds default and will do all it can to dissuade political leaders from allowing Greece to fail.

In the end, when political leaders do the math, they may realize it is cheaper to save Greece than engineer a bank rescue only two years after the last round of bank bailouts, analysts said.

“There is no political advocacy for such a prospect in Greece or in Europe as it would signal the beginning of the unraveling of the euro zone,” said George Pagoulatos, a professor at the Athens University of Economics and Business. “The markets would start attacking Portugal and Ireland, and the domino would stop somewhere around France.”

Jack Ewing reported from Frankfurt, and Niki Kitsantonis from Athens. Stephen Castle contributed from Wroclaw, Poland.

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