Greece agrees to cut state jobs

Trade unions have protested outside the prime minister’s office in Athens to oppose further spending cuts [Reuters]

Greece’s coalition government has agreed 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 on Monday signals a major shift in Greece’s policy, as state jobs have so far been protected during the country’s acute financial crisis, which started about two years ago.

Dimitris Reppas, Greece’s minister for public-sector reform, said the job cuts would be carried out under a new law that allows such firings.

Al Jazeera’s John Psaropoulos, reporting from Athens, said the reduction in state workers may be only the beginning of job losses.

“[The cuts] are coming as part of a commitment to fire 150,000 public service workers… This is in addition to 200,000 public service employees who have left through [negotiated] dismissal, early retirement and firing,” he said.

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

Crucial meetings

Greece has been kept solvent since May 2010 by payments from a $145bn 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 $131.6bn in Greek debt, in exchange for a cash payment and new bonds worth 50 per cent less than the original face value, longer repayment terms and a cut in the interest rate to be paid on the bonds.

Those close to the negotiations expect private investors to take an overall cut of up to 70 per cent 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,” Reppas said. “The work force 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.

Greece has promised to reduce its 750,000-strong broader public sector by 150,000 by the end of 2015, but has so far insisted it could reach that target through staff attrition.

Angela Merkel, the German chancellor, said Greece had to come to terms with the “troika” of lenders – the European Commission, European Central Bank and IMF – to get the funds it needs to meet massive debt repayments in March.

Speaking in Paris alongside Nicolas Sarkozy, the French president, on Monday, Merkel said she wanted quick action from Athens.

“We want Greece to stay in the euro,” she said. “[But] I want to make clear once again that there can be no deal if the troika proposals are not implemented. They are on the table, time is of the essence. Something needs to happen quickly.”

Merkel’s warning

Merkel, whose country is Europe’s main paymaster, made clear that the deal affected not only Greece but the wider currency bloc, which fears that a default would hit much larger economies such as Spain and Italy.

“A lot is at stake for the entire eurozone,” she said.

Greeks have been worn down by a deep recession, now in its fifth year, and waves of austerity measures imposed under the first bailout.

The country has been hit by a wave of strikes and protests, some violent, in anger against the Greek government for the mismanagement of the country’s fiscal affairs.

With Greece facing $19bn in debt repayments in March, a bill it cannot meet without further bailout funds, the eurozone and global financial markets are closely monitoring events in Athens.

Greek political leaders, positioning themselves for a possible general election in April, have been hesitant to accept another package of deeply unpopular wage and pension reductions, job cuts and tougher tax-enforcement measures.