Gov't, troika reach deal, paving way for aid release

PM confirms that 15,000 civil servants to go by end of 2014

Government and troika officials on Monday announced that they had finally reached a deal on a series of contentious reforms – including thousands of layoffs in the civil service – following two weeks of tough talks, paving the way for the release of crucial rescue funding over the coming days.

After Finance Minister Yannis Stournaras heralded the breakthrough on Monday morning, telling reporters, “We have a deal,” Prime Minister Antonis Samaras gave a triumphant televised address in which he sought to reassure Greeks that three years of tough measures had not been in vain.

“The sacrifices are beginning to pay off,” he said, adding that “the situation is changing, the psychology is changing.“ “Until recently, Greece had been an example to avoid in Europe,” he said, echoing Stournaras’s conviction that Greece would achieve a primary surplus this year, allowing it to seek more debt relief.

The premier also confirmed that a total of 15,000 civil servants would be dismissed before the end of 2014, with 4,000 to go this year, but he stressed that each departure would be replaced by a new recruit. “The same number of new people will be recruited in their place,” he said.

Poul Thomsen, the head of the International Monetary Fund’s mission to Greece, struck a similar note at a conference in Athens organized by The Economist, saying that public sector staff “will not be eliminated but replaced by young, capable people.” He did not confirm explicitly that the one-hiring-to-one-firing ratio would apply.

Thomsen stressed that Greece had “indeed come a long way” with its reform program, noting that “the fiscal adjustment has been exceptional by any standard.” He noted, however, that major challenges remained. “Tax evasion remains a huge problem,” he said. Nevertheless, Greece has ticked enough boxes to put it on course for the release of a 2.8-billion-euro loan tranche that had been due in March as well as 7.2 billion euros for the recapitalization of the country’s banks, the envoy said.

An official statement issued jointly by the IMF, the European Commission and the European Central Bank, which have jointly extended Greece two foreign bailouts worth 240 billion euros since 2010, confirmed that the creditors were happy with the government’s performance. “Fiscal performance is on track to meet the program targets, and the government is committed to fully implement all agreed fiscal measures for 2013-2014 that are not yet in place,” the statement said, adding that the release of a loan tranche of 2.8 billion euros that had been due in March “could be agreed soon by the euro-area member states.”

The deal with the troika prompted angry responses from opposition parties, with Alexis Tsipras, the head of the main leftist opposition SYRIZA, taking particular issue with the civil service layoffs which he described as “human sacrifices.“ “Instead of emerging from the crisis, we are sinking further and further into it,” he said.