Greece to vote on tough salary, pension cuts
ATHENS, Greece – Greece’s government yesterday rushed to push through legislation detailing tough pension and salary cuts needed to secure access to the country’s second international package of bailout loans.
Lawmakers are due to vote late Tuesday night on public sector pension cuts and other savings measures aimed at bringing the budget back in line with targets. Ministers, meanwhile, decided to apply labor reforms, such as cuts to the minimum wage, retroactively to February 14.
Parliament must push through the final bills before the country can receive any funds from its new (euro) 130 billion ($15.1 trillion) package of rescue loans from other eurozone countries and the International Monetary Fund.
The bailout and accompanying bond swap deal with private creditors are meant to save the country from a potentially catastrophic default that could drag down other financially vulnerable countries and threaten the European Union’s joint currency, the euro.
The rescue package is Greece’s second in less than two years. The country has been surviving since May 2010 on funds from a first bailout from the eurozone and IMF, and has received (euro) 73 billion from the initially approved (euro) 110 billion package.
But more than two years of harsh austerity implemented to secure the rescue funds have taken a hefty toll on the Greek economy, with businesses closing in the tens of thousands and unemployment at a record high 21 per cent.
“It is dramatic to cut someone’s pensions … But why do we have to take these measures? Because our budget is still running at a loss,” Finance Minister Evangelos Venizelos said in Parliament. “We are still adding debt to our debt. And if we do not start to generate a primary surplus next year, that will be catastrophic.”
Measures include a 22 per cent cut in the minimum salary, currently at (euro) 751per month, for private sector workers and a 32 per cent cut for workers under the age of 25, where unemployment runs at 48 per cent.
Limits are also being imposed on collective wage agreements and the process of labor arbitration, with some measures to remain in effect until unemployment falls below 10 per cent, from the current level of more than 20 per cent.
Lawmakers are to vote again on Wednesday on another bill implementing cuts that have previously been announced.
Prime Minister Lucas Papademos, a technocrat heading Greece’s temporary coalition government, is to head to Brussels for a meeting Wednesday with European Commission head Jose Manuel Barroso. European Parliament President Martin Schulz was in Athens Tuesday for a series of meetings and was to deliver a speech in Parliament.
Greece’s European partners have been pressing the country to implement the measures it has already passed, after repeated delays and missed targets over the last two years eroded trust in the ability of Greece’s politicians to stick to their pledges.
On Monday, the Standard & Poor’s ratings agency downgraded Greece’s credit rating to “selective default” over a debt writedown deal with private creditors that is an integral part of the second bailout.
The downgrade had been widely expected, as ratings agencies had said the bond swap with private creditors, which seeks to cut (euro) 107 billion off Greece’s debt, would constitute a selective default. Once the swap is carried out next month, the agencies are expected to upgrade Greece.
The Finance Ministry said the S&P downgrade “was pre-announced and all its consequences have been anticipated, planned for and addressed by the relevant decision of the European Council and the eurogroup.” It added that the move had “no impact in the Greek banking sector.”