ATHENS — Greece’s coalition government on Monday caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, amid mounting international pressure to agree on austerity measures needed to secure major new debt agreements.
The announcement signals a shift in Greece’s policy, as state jobs have so far been protected during the country’s acute financial crisis, which started about two years ago.
Public Sector Reform Minister Dimitris Reppas said the job cuts would be carried out under a new law that allows such firings.
Unions have called a 24-hour general strike for today, in response to the austerity measures, while about 4,000 protesters braved torrential rain late Monday to join protest rallies.
Greece is racing to push through painful reforms and clinch a $170 billion bailout deal from its European partners and the IMF.
Debt-ridden Greece has been kept solvent since May 2010 by payments from a C110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.
Its implementation depends on the austerity measures but also on separate talks with banks and other private bondholders to forgive C100 billion ($131.6 billion) in Greek debt, in exchange for a cash payment and new bonds worth 50 per cent less than the original face value, longer repayment terms and a cut in the interest rate to be paid on the bonds. Greek government officials say they expect private investors to take an overall cut of up to 70 per cent on the value of their bonds.
But delays in negotiations with rescue creditors pushed a crucial meeting of coalition party leaders back by one day to Tuesday.
“We are opposed to indiscriminate firings,” Reppas said. “The work force reduction is strictly connected with the restructuring of services and organizations at each ministry.”
Officials at the Public Sector Reform Ministry gave no details of the new plan, or say how many of the job cuts would be compulsory.
The government has promised to reduce the 750,000-strong broader public sector by 150,000 by the end of 2015, but has so far insisted it could reach that target through staff attrition.
Greece’s coalition party leaders pushed back a key meeting by a day till Tuesday, due to the ongoing negotiations with EU-IMF debt inspectors who were to hold a new round of talks later Monday.
They have already agreed to cut 2012 spending by 1.5 per cent of gross domestic product — about C3.3 billion ($4.3 billion) — improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them.
Creditors are also demanding spending cuts in defence, health and social security, a cut in the minimum wage, as well as the civil service layoffs, as European pressure increased on Greece to make more concessions.
European Commission spokesman Amadeu Altafaj Tardio said Greece is already “beyond the deadline” to end the talks.
After talks in Paris with French President Nicolas Sarkozy, German Chancellor Angela Merkel said there can be no bailout deal unless Athens implements creditors’ proposals.
“(The proposals) are on the table,” she said. “And time is pressing. Therefore something has to happen quickly.”
“Time is pressing and for the entire eurozone is much at stake,” Merkel added.
Greece is in its fifth year of recession, while unemployment has hit record highs of about 19 per cent — following a spate of austerity measures in return for the rescue loans, that included significant cuts in pensions and salaries coupled with repeated tax hikes and an increase in retirement ages.
“The current policy of austerity ... is turning workers into pariahs, jobless people and pensioners into paupers and deprives our youth of any hope,” a statement from the servants’ union ADEDY said. “This policy has already pushed Greeks beyond their limits and must be stopped at any cost.”
Yiannis Panagopoulos, leader of Greece’s largest union, the GSEE, said the creditors’ demands were certain to lead to more hardship.
“What is going on is not a negotiation,” he said. “It’s blunt, cynical blackmail targeting an entire people.”