Troika talks continue ahead of party leaders' meeting
Prime Minister Lucas Papademos is due to meet the leaders of Greece’s three coalition parties on Tuesday evening to finalize the measures that the government will commit to in order to receive further funding from its eurozone partners and the International Monetary Fund.
PASOK’s George Papandreou, New Democracy’s Antonis Samaras and the head of the Popular Orthodox Rally (LAOS) Giorgos Karatzaferis are due to hold talks with Papademos some time after 9 p.m.
Papademos held lengthy talks with representatives of the European Commission, European Central Bank and IMF on Monday night. The negotiations, which centered on the budget cuts that Greece has to make to satisfy its lenders, ended at about 4 a.m.
On Tuesday, the troika representatives met with Finance Minister Evangelos Venizelos and Labor Minister Giorgos Koutroumanis. It appears that one of the elements to the agreement will be a reduction of 20 percent to the minimum wage of 751 euros per month (gross).
"Unfortunately the negotiations are so tough that as soon as one chapter closes, another opens,» Venizelos said late on Monday.
Greece has to reduce public spending by 1.5 percent of gross domestic product, or 3.3 billion euros. The largest chunk, about 1.1 billion, will be from cuts in spending on health and medicines. The public investment program will be limited by 300 million euros and defense spending will be cut by the same amount.
Some 15,000 places in the civil service will also be scrapped this year as the government attempts to reduce over the next three years by 150,000 the number of people employed in the public sector.
All the cuts will have to be approved and agreed on by the three party leaders on Tuesday evening.
Another issue the leaders will have to finalize following their initial talks on Sunday night is the reduction in the minimum wage. The three leaders seemed to accept this in return for the idea of scrapping the 13th and 14th monthly salaries being dropped.
However, cuts to the minimum wage will have a knock-on effect because they will lead to a 1.3-billion drop in tax revenues and a 2.4-billion reduction in social security contributions. This means the government will have to make up for these losses. Furthermore, Papandreou, Samaras and Karatzaferis are also being asked to agree to scrap the law that allows terms of collective contracts to apply even after they have expired, meaning employers will have the ability to negotiate new deals based on lower wage structure.
With Greece's future in the eurozone in question, German Chancellor Angela Merkel has ratcheted up the pressure on Greek politicians to conclude a deal with the troika.
The full package must be agreed with Greece and approved by the eurozone, ECB and IMF before February 15.
This is to allow time for complex legal procedures involved in a bond swap deal - under which the value of private investors' holdings of Greek debt will be cut radically in value - so Athens can get rescue funds before March 20 when it has to meet 14.5 billion euros of maturing bonds.
Jean-Claude Juncker, who chairs the group of eurozone finance ministers, backed a plan put forward by Merkel and French President Nicolas Sarkozy to set up a special escrow account into which Greece would make future interest payments as a means of guaranteeing that creditors were consistently paid.
However, Juncker denied that the euro was in danger because of the debt crisis. «The euro will outlive us all,» he told German Inforadio on Tuesday.