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Greece, under international pressure, caves in on civil service firings

- Associated Press - Monday, February 6, 2012

ATHENS (AP) — 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 so far have 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 Tuesday in response to the new austerity measures, while about 4,000 protesters braved torrential rain late Monday to join protest rallies organized in central Athens by left-wing opposition parties.

Greece is racing to push through painful reforms and clinch a 130-billion-euro ($170 billion) bailout deal from its European partners and the International Monetary Fund to avoid a March default on its bond payments.

Debt-ridden Greece has been kept solvent since May 2010 by payments from a 110-billion-euro ($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 100 billion euros ($131.6 billion) in Greek debt, in exchange for a cash payment and new bonds worth 50 percent 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 percent 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," Mr. Reppas said. "The workforce 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 so far has insisted it could reach that target through staff attrition.

Greece's coalition party leaders pushed back a key meeting by a day until Tuesday because of the ongoing negotiations with EU-IMF debt inspectors who were to hold a new round of talks later Monday.

They already have agreed to cut 2012 spending by 1.5 percent of gross domestic product — about 3.3 billion euros ($4.3 billion) — improve competitiveness by slashing wages and non-wage costs, and recapitalize banks without nationalizing them.

Creditors also are demanding spending cuts in defense, health and social security and 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."

Mrs. Merkel added, "Time is pressing, and for the entire eurozone is much at stake."

Greece is in its fifth year of recession, while unemployment has hit record highs of about 19 percent 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."

Sylvie Corbet in Paris and Raf Casert in Brussels contributed to this article.

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