ECONOMY

Salaries on the chopping board

Talk of reductions to private sector salaries in a bid to boost the economy?s competitiveness has resurfaced, with investment bank Credit Suisse arguing that pay packets need to be cut by 7 percent.

In May, the Greek government indicated that it was called upon by the International Monetary Fund and the European Union to reduce salaries in exchange for a 110-billion-euro rescue loan but then claimed it had managed to avoid the painful decision for the country?s estimated 2.5-3 million private sector workers. The IMF had publicly denied that the loan package mandated such salary cuts.

In the latest report issued by Credit Suisse, the bank points out that salary hikes in Greece have been heavily outpacing growth in productivity during the last decade. Greek labor costs per unit have increased 38 percent since 2000, it said, versus a 6 percent rise in Germany.

Finance Minister Giorgos Papaconstantinou also raised the issue earlier this week in comments to state television NET, saying that improvements to competitiveness are partly connected to the cost of labor.

Pressure to reduce local salaries is also coming from Greece?s EU partners.

Last month, Germany?s Deputy Finance Minister Joerg Asmussen said that Greek workers will have to accept wage cuts even as the government reduces spending and raises taxes to restore public finances.

Greece squandered its competitiveness over the last 10 to 15 years after losing its monopoly as the European Union?s most southeasterly outpost amid the region?s expansion, Asmussen said.

Meanwhile, the government plans to extend the working week for public sector staff to 40 hours, in line with private industry, Interior, Decentralization, and e-Governance Minister Yiannis Ragousis said on Thursday.

As well as the increase from the current 37.5 hours a week, the Interior Ministry plans to change work timetables so the public can access more services in the afternoon, Ragousis added.

The measures are intended to provide ?the best service for citizens, which will come from the increase in the public sector?s productivity,? he said, adding that the move wasn?t one of the conditions for the EU-IMF rescue loan.