Greece has agreed to lay off 15,000 public-sector workers by the end of 2012, a government minister said Monday, as international pressure mounts on Athens to accept austerity measures needed to secure major new debt agreements.
The cuts will come by abolishing or cutting back a number of public-sector entities, Administrative Reform Minister Dimitris Reppas said in a statement.
The announcement late Monday signaled 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 delayed 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 later Monday.
Pressure has been growing on Greece from its euro-zone partners to accept a new round of strict austerity moves in exchange for a €130 billion ($171 billion) loan promised to the country in October. Without that aid, Greece faces a €14.4 billion bond redemption next month that it can't pay, raising the specter of a default by the country.
Meanwhile, the EC gave its strongest warning yet on Monday to Greece's political leaders to accept the latest austerity measures and complete talks with private creditors on debt restructuring, saying the country already has missed important deadlines.
Mr. Papademos has called on the three parties that make up his coalition government to back the demanded reforms, including the 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—of the Socialist, or Pasok, party; the New Democracy party and the nationalist Laos party—were close to agreeing on a 20% cut in Greece's minimum wage, two senior government officials said.
Reflecting growing optimism that a deal was close, the Athens stock exchange closed 3% higher at 785 points Monday, bucking a broader downturn on other European exchanges.
On Monday, the leaders of France and Germany turned up the heat on Greece, saying the indebted euro-zone 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," the French president said. "Funds won't be disbursed if these decisions aren't taken,"
Apart from the layoffs announced late Monday 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%. 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 plan 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 they will hold a 24-hour nationwide general strike Tuesday—the latest in a series of strikes called to protest successive waves of austerity measures Greece has taken over 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. Earlier Monday, two Socialist lawmakers signaled they would vote against the reforms—although it is unlikely that 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 basic points of the international lenders' demands. Among them are making cuts equal to 1.5% of gross domestic product in 2012, steps to recapitalize 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 in talks with private-sector creditors over a planned €100 billion debt write-down that is also a precondition for the new loan. The creditors have agreed to accept lower interest rates on the new bonds Greece will offer after the write-down. But there are concerns in other European capitals and within the IMF that the debt restructuring doesn't go far enough in reducing Greece's debt burden.
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