Greece plans to cut 15,000 public sector jobs

Greece has agreed to lay off 15,000 public sector workers by the end of 2012, a government minister said overnight, as international pressure mounts on Athens to agree on austerity measures needed to secure major new debt agreements.

The cuts will come either by abolishing or downsizing a number of public sector bodies, Administrative Reform Minister Dimitris Reppas said in a statement.

The announcement signalled a concession after meetings between Greek Prime Minister Lucas Papademos and the country's political leaders over a reform program demanded by the country's creditors had been pushed back for another day. Party leaders remain at odds over broad wage cuts, one of the most politically sensitive demands issued by Greece's creditors.

The country is scrambling to negotiate last minute details with officials from the European Commission, International Monetary Fund and the European Central Bank -- known as the troika -- on the new loan program.

Mr Papademos was expected to meet with the troika officials this morning.

Pressure has been growing on Greece from its eurozone partners to accept a new round of painful austerity in exchange for a €130 billion ($159bn) loan promised to the country in October. Without that aid, Greece faces a €14.4bn bond redemption next month it can't pay, raising the spectre of a disorderly default by the country.

Meanwhile, the European Commission gave its strongest warning yet to Greece's political leaders to accept the latest austerity measures and complete talks with private creditors on a debt restructuring, saying overnight the country has already missed important deadlines.

Mr Papademos has called on the three parties that make up his coalition government to back the reforms being demanded, including highly controversial cuts in private sector pay, even as Greece girds for elections widely expected to take place in April.

As a condition for further aid, Greece's official lenders have demanded cross-party support for the reform and austerity program, to ensure there is no backsliding after a new government takes office this spring.

Despite the delays, the three party leaders -- from the Socialist, or Pasok, party; the New Democracy party and the nationalist Laos party -- were close to agreeing on a 20 per cent cut in Greece's minimum wage, two senior government officials said.

Reflecting growing optimism a deal was close, the Athens stock exchange closed 3 per cent higher at 785 points this morning, bucking a broader downturn in other European exchanges.

Overnight, the leaders of France and Germany turned up the heat on Greece, saying the indebted eurozone country won't receive new bailout funds next month unless it implements austerity measures.

Speaking after a meeting in Paris, France's President Nicolas Sarkozy and Germany's Chancellor Angela Merkel also urged all Greek parties, currently working together in a caretaker government, to commit to the austerity package before general elections in the spring.

"We are saying to our Greek friends that they must decide now," French President Nicolas Sarkozy said at a news conference after meeting German Chancellor Angela Merkel. "Funds won't be disbursed if these decisions aren't taken."

Apart from the layoffs the troika also has been demanding new cutbacks in government spending and steep cuts in supplemental pensions paid to retirees.

According to Greek officials, the political leaders are near a deal that would reduce those supplementary pension benefits by about 20 per cent. Two-month bonus salaries paid to Greek workers each year are expected to be kept intact, but could be trimmed.

"Unless there is a revolt in any of the three parties, the leaders are expected to give their consent for the cuts," one Greek official with direct knowledge of the talks said. The new austerity package would then have to be voted into law by the country's parliament.

But signs of popular protest are looming. Greece's two major umbrella unions said overnight they will hold a 24-hour nationwide general strike today -- the latest in a string of strikes called to protest successive waves of austerity measures Greece has taken in the past two years.

Apart from the popular reaction on the streets, the measures are likely to face resistance among lawmakers, many of whom have already balked at voting for new cutbacks. Yesterday, two Socialist lawmakers signalled they would vote against the reforms -- although it is unlikely a revolt by deputies will imperil the government's super majority in parliament. The three parties who make up the coalition control 252 seats in the 300-member parliament.

After a meeting lasting more than five hours on Sunday, Mr Papademos said the political leaders had agreed on some of the basic points of the international lenders' demands. Among them are making cuts equal to 1.5 per cent of gross domestic product in 2012, steps to recapitalise Greece's banks and measures to boost the country's flagging competitiveness.

At the same time as it negotiates a new loan deal, Athens is also in talks with private sector creditors over a planned €100bn debt writedown that is also a precondition for the new loan.

The talks with the private sector creditors are said to be very close to being finalised, after the creditors agreed to accept lower interest rates on the new bonds Greece will offer after the writedown. But there are concerns in other European capitals and within the IMF the debt restructuring doesn't go far enough in reducing Greece's debt burden.

Source: The Australian