Greece OKs Measures To Meet Fiscal Objectives
–Cabinet approves plans to slash pensions, tax low-income earner, place 30,000 public workers in labor reserve
–Greece affirms commitment to stay in euro, meet obligations
–Talks with Troika to continue over weekend in Washington
–Measures could ignite popular protests, political instability
ATHENS — Greece decided Wednesday to slash pensions, tax low-income earnersand place thousands of public workers in a special labor reserve this year asthe country scrambles to meet fresh austerity demands from its internationalcreditors in exchange for assist.
In a statement following a marathon, six-hour-long cabinet meeting, thegovernment affirmed its commitment to meet its budget targets and said it wouldnot abandon Europe’s common currency, the euro.
“These decisions send a message to our partners and the markets that Greecewill and can fulfill its obligations and remain inside the core of the euro andthe European Union,” the statement said.
Greece’s government is under pressure to come up with more than EUR6 billionin additional budget cuts over the next two years to safe the release of thecountry’s next bailout payment, even as worries mount that further austeritymeasures could ignite more popular protests and political instability.
The announcement follows two days of talks with officials in the EuropeanUnion, the European Central Bank and the International Monetary Fund–knownlocally as the troika–over what new measures Greece would consider to rein in abudget deficit set to overshoot targets in both 2011 and 2012.
Talks with the troika are due to continue over the weekend in Washington,where Finance Minister Evangelos Venizelos is scheduled to attend the annualmeetings of the World Bank and International Monetary Fund.
At stake is an EUR8 billion assist tranche that Greece must receive inside the nextfew weeks or the federal government will run out of money by the middle of October.
Negotiators hope to clinch a deal by Oct. 3, in time for it to be approved ata scheduled meeting of the 17 euro-zone countries in Luxembourg.
Venizelos set the tone in parliament ahead of the cabinet session, tellinglawmakers they must impose more reforms or risk a collapse in Greece’s economy.
“We have not fully understood the danger [we face], that the system couldcease operating, that the national economy could cease operating,” he said.
In its statement, the authorities stated that with immediate effect it will beginculling some 30,000 workers from the public-sector payroll.
Those workers will be placed in a reserve labor pool at 60% of their salaryfor a year, after which they would be dismissed if no other suitable jobs werefound for them inside the public sector.
Greece has been under pressure to downsize the number of public employees,with the troika pushing the govt to rescind all new hirings it has made–with the consent of the troika–in the past two years. But as part of thenegotiations, the troika agreed that those new hires will now be placed in thelabor reserve rather than face immediate dismissal.
“The talks with the troika were long, exhausting and we were under intensepressure for cuts in the public sector,” stated a senior govt official. “Theone thing we achieved is that, for the time being, we managed to avoid anyimmediate layoffs.”
However, as aspect of its reform commitments, Greece has also agreed to cutcivil-service salaries as portion of an effort to harmonize public-sector wages andeliminate perks and benefits enjoyed by many civil servants.
In its statement Wednesday, the government affirmed its commitment to overhaulthe public-sector wage structure but gave no details.
The govt also stated it could reduce the taxable-income threshold to EUR5,000 from EUR8,000 currently, a move that is expected to affect hundreds ofthousands of the working poor and self-employed. That taxable-income thresholdhas already been lowered once this year–from EUR12,000 previously–as aspect ofan earlier round of austerity measures.
Other cuts announced by the government include slashing pensions on high-income retirees.
Those retirees collecting more than EUR1,200 in their gross monthly pensionswould see their pensions above that threshold cut by 20%–and up to 40%–forretirees under the age of 55 and collecting more than EUR1,000 a month.
Unions have already announced their opposition to the measures. On Thursday,public transit workers in Athens will stage a 24-hour strike over the freshausterity plans, while teachers are also planning a nationwide strike.
In an announcement earlier Wednesday, Greece’s two principal umbrella unions–private sector GSEE and civil servants union ADEDY–announced a nationwidepublic-sector strike for Oct. 5, and a nationwide general strike on Oct. 19.
Many Greek political leaders are looking beyond the troika talks to possibleprotests against the new measures, which would include accelerated public-sectorlayoffs and higher taxes, and would shut down dozens of publicly fundedorganizations.
“Greeks are hard-pressed and will be asked to pay more,” stated a senior memberof the governing Socialist Party, or Pasok. “There are fears of a tax revolt andeven a revolt inside the party when those measures will come up for vote inparliament.”
Some lawmakers are uneasy about being back in their districts, remembering theviolent protests of early summer. They say constituents are coming into theiroffices asking for support to cover utility bills as unemployment climbs higher.Opposition parties are clamoring for new elections. Even Pasok party membersbelieve Greece will need a multi-party coalition govt for the politicalclout to push through new reforms.
“There has been talk for some time that a single-party federal government can’t dealwith such a crisis,” the senior Pasok member said. “I don’t think there will bea referendum on whether Greece should stay in the euro zone. I think there willbe early elections.”
George Karatzaferis, head of the small right-wing opposition LAOS party, saidhe would vote against further austerity measures.
“You are putting at risk social cohesion,” Karatzaferis told Venizelos inparliament Wednesday. “That is why I am saying a big “no” [to these measures].”
-By Stelios Bouras, Alkman Granitsas and Costas Paris, Dow Jones Newswires; +30 210 331 2881; alkman.granitsas@dowjones.com
(End) Dow Jones Newswires 09-21-110435ET Copyright (c) 2011 Dow Jones & Company, Inc.
Posted: October 22nd, 2011 under Market News.
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