- Associated Press - Wednesday, September 21, 2011

ATHENS — Austerity-fatigued Greeks were slapped with new tax increases and pension cuts Wednesday, while the government pledged to suspend 30,000 civil servants in a hectic scramble to keep its bailout payments flowing and soothe global market fears that Greece will go bust.

Without continued payments from a $150 billion program of rescue loans from fellow eurozone countries and the International Monetary Fund, the heavily indebted country will run out of cash by mid-October.

But Athens has lagged behind savings targets set in its bailout agreement, angering international debt inspectors who threatened to halt the loans as the country heads for a fourth year of recession amid record unemployment.

Under the measures announced Wednesday, monthly pensions will be cut by 20 percent above a $1,636 threshold, while retirees younger than 55 will lose 40 percent of their pensions above the sum of $1,371.

The tax-free annual income limit will be cut to $6,818 from $10,908 as of this year, while the number of civil servants to be suspended on partial pay will rise to 30,000 by the end of this year, from 20,000.

After a year of forced idleness on 60 percent of their base salary, these workers will be shifted to other state jobs or fired - despite having been hired with a lifetime job guarantee.

The public sector employs nearly 800,000 in the country of 11 million, and Greece’s creditors repeatedly have urged cuts.

The government also pledged to speed up privatizations and open up closely regulated professions to competition.

“This sends a message to our partners and to markets that Greece both wishes and is able to fulfill its commitments and remain at the core of the eurozone and the EU,” government spokesman Elias Mossialos said following a 6 1/2-hour emergency ministerial meeting.

European Union and IMF debt inspectors are due back in Athens early next week to finalize their latest quarterly assessment of Greece’s austerity program, on which approval of the next $10 billion loan payment hinges.

The review was suspended earlier this month amid talk of delays and missed targets, and it took two nights of conference calls Monday and Tuesday for Finance Minister Evangelos Venizelos to talk debt inspectors into returning.

“We have to take supplementary measures … because of the recession, because of the difficult task, and the weakness of the central administration have not produced the required results,” Mr. Venizelos told lawmakers earlier Wednesday.

The government already has announced a new property tax this month in a hurried attempt to plug a budget gap.

The new tax will be paid through electricity bills to make it easier for the state to collect, but the plan could run into problems as the power company union has threatened to block collection of the money.

The announcement of more tax increases and spending cuts - after 20 months of harsh austerity - met with mounting anger late Wednesday.

“I’m 73 years old and I will start a war,” retiree Efthymios Gardikiotis said. “The same way [the government] wants a war.”

Mr. Gardikiotis was among thousands of protesters from a communist-backed union who demonstrated outside parliament as the cuts were made public.

Earlier, Greece’s two largest labor unions announced another general strike on Oct. 19, while a 24-hour public transport and taxi strike is expected to play havoc with Athens traffic Thursday - designated World Carfree Day.

The conservative main opposition New Democracy party issued a statement deploring the “tsunami of unfair and unbearable measures, which are a result of the government’s mistaken economic policy.”

Air traffic controllers also called a three-hour strike for Thursday, forcing airlines to cancel dozens of domestic flights.

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