Greece said it will accelerate budget cuts to keep emergency loans flowing, extending austerity measures that have deepened recession and failed to ease doubts that it can avoid default.
Subway, tram, train, bus and trolley workers and state- school teachers are holding a 24-hour strike in Athens on Thursday to oppose cuts in pensions and workers’ pay. Flights to and from the Athens International Airport will be disrupted as air- traffic controllers walk out for three hours.
The latest round of cuts targeting civil servants’ wages and pensioners were demanded by international lenders to ensure Greece reach deficit-reduction targets in a euro110 billion-bailout and receive a payment due next month.
The cuts will enable Prime Minister George Papandreou to address his biggest deficit, the “credibility deficit,” Jens Bastian, the Alpha Bank Fellow for Southeast Europe at St Antony’s College at the University of Oxford, said in a television interview on Thursday.
Meeting international targets and reducing civil-service costs are “a matter of national urgency,” he said.
Finance Minister Evangelos Venizelos heads to Washington tomorrow to attend the annual meetings of the International Monetary Fund where he will hold talks with IMF Managing Director Christine Lagarde.
Without the infusion of emergency loans, “the risk is that the system, the financial sector and the real economy stop functioning,” Venizelos told Parliament in Athens before Papandreou convened his inner Cabinet yesterday to complete the cuts.
LATEST CUTS
Measures announced following two rounds of talks with the European Union and the IMF include: a 20 per cent cut in pensions of more than euro1,200 ($1,650) a month, according to a government statement; pensions paid to those younger than 55 will be shaved by 40 per cent for the amount exceeding euro1,000 and wages will be lowered for 30,000 state employees.
With an euro8-billion aid payment in the balance, Greek creditors are also in the final stages of negotiating a bond exchange intended to reduce the country’s debt load of about euro350 billion. The swap was part of a second rescue set by European leaders on July 21.
FUND RATIFICATION
EU officials are squabbling over implementation of the agreement, which includes an upgrade of the bailout fund, as national legislatures ratify its terms, countering public opposition to channeling more money to keep Greece in the currency union. Greek bonds rose in early trading on Thursday, sending the yield on two-year notes down 27 basis points to 66.2 per cent at 12:20 pm in Athens.
