October 1, 2011 / 12:37 PM / 7 years ago

State job cuts on table at Greek loan talks

ATHENS (Reuters) - Greece hopes to clinch a deal with its EU and IMF lenders on how to meet a promise to lay off state workers — a key condition to free up urgently needed bailout aid — by Sunday, senior government officials said.

Without the release of an 8 billion euro ($10.7 billion) tranche of an EU bailout, massively indebted Greece could run out of money to pay state wage bills within weeks.

Finance Minister Evangelos Venizelos told a newspaper the loan tranche was “assured” because of tough steps his government had taken. But a senior German government official told Reuters nothing had been decided.

Negotiators from the International Monetary Fund, European Union and European Central Bank, known as the troika, left Greece a month ago saying they were not convinced Athens could carry out the necessary spending cuts and tax hikes.

The negotiators returned this week after getting written assurances that the government would implement pledges to speed up plans to cut the number of state workers by a fifth by 2015, impose tax hikes and slash public sector wages.

They met Venizelos and other officials on Saturday for a third day of talks.

One measure is to start layoffs by putting 30,000 state workers this year in “labor reserve.” These workers would be paid 60 percent of their salaries for a year and then be dismissed if they cannot find new jobs.

The Greek constitution guarantees jobs for life to all state employees, making the promise to cut payroll numbers a legal and political minefield.

“We are close to a deal on the labor reserve,” one senior official said after several hours of difficult talks on the issue and before a new meeting later on Saturday.

“We want to conclude negotiations with the troika on the labor reserve by tomorrow and also approve it in a cabinet meeting tomorrow,” the official said.

The inspectors want assurances that the plan will be implemented swiftly and will not only include civil servants close to retirement, the official said.

European officials are scrambling to avert a Greek debt default, which could wreck balance sheets of European banks, damage the prospects of the euro single currency and possibly plunge the world into a new global financial crisis.

JOBS FOR LIFE

Venizelos’s office said officials discussed privatizations, public administration and justice sector reforms with the troika. They met later on Saturday to discuss the 2012 budget.

Venizelos told pro-government newspaper To Vima that the loan tranche was “assured” because “we are taking such difficult decisions and the Greek people are shouldering such great sacrifices.”

The government has yet to give details about how it would decide which workers would be moved into the labor reserve.

The early Sunday edition of the newspaper Kathimerini said, without quoting sources, some members of the cabinet had threatened to resign rather than approve sackings.

The austerity measures are deeply unpopular. Opponents say such harsh cuts will deepen the impact of a three-year economic crisis and disproportionately hurt the poor and middle class.

Labor unions hope to step up political pressure with a campaign of strikes and protests in coming weeks. The Socialist government has a majority of just four seats in parliament and could be forced into elections if a handful of lawmakers balk.

Hundreds of black-shirted anarchists marched through the capital’s central Syntagma Square on Saturday, chanting slogans and carrying black and red flags. A few women among the crowd pushed children in strollers.

Police hope to prevent a repeat of violent clashes in June in which more than 100 people were hurt.

Striking civil servants have tried to block some of the talks. At one point on Friday, transport ministry workers prevented the troika envoys from reaching their minister.

Private lenders agreed to take a 21 percent “haircut” on the value of Greek debt as part of a bailout agreed in July and some EU officials have suggested the discount may have to be increased when the troika finishes looking through the books.

The chief executive of Deutsche Bank, Josef Ackermann, who has led debt talks on behalf of banks, said any revision of the July 21 deal could cost the voluntary support of the banks.

“The impact of such a move will be incalculable. This is why I am warning in the most forceful way against any material revision,” he told Kathimerini.

The finance minister of Slovakia — a tiny country but potentially a pivotal one because its parliament could block plans to expand the European bailout fund — said policymakers need to be ready for the impact of a Greek bankruptcy if the troika concludes that default is inevitable.

“We are now waiting for results of the IMF and EU inspectors. This should be the basis for a clear assessment whether Greece’s position is sustainable, or whether bankruptcy and a write-off of part of the debt are inevitable,” Ivan Miklos told Czech daily Lidove Noviny.

“In case we draw a conclusion that the situation in Athens is not sustainable, we must say how we are prepared for a coordinated bankruptcy and how we will prevent further contagion.”

In one bit of good news, Qatar pledged to invest $1 billion in a firm with a permit to mine gold in Greece.

The Greek mine would make European Goldfields the EU’s biggest primary gold producer. Prime Minister George Papandreou met Qatar’s Emir Sheikh Hamad bin Khalifa al-Thani in Athens on Saturday and said Qatari investments were a sign of trust in Greece’s economy.

($1 = 0.745 Euros)

Additional reporting by Harry Papachristou; Writing by Peter Graff and Ingrid Melander; Editing by Sonya Hepinstall

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