The government plans to introduce legislation to make a 3 percent ceiling on pay raises in loss-making public utilities compulsory should their management not meet the April 30 deadline for reaching agreements with the unions, sources say. The law, recently voted into legislation, sets the deadline for the conclusion of agreements for utilities on new personnel regulations, but even some ministers like Michalis Liapis of Transport and Communications last week questioned its validity if this is not preceded by adequate dialogue. But, after the meeting of the responsible ministerial committee last week, the government announced that it was certain that the law will be implemented by the deadline. According to reports, an agreement was made that strict warnings would be issued to the CEOs of utility companies that deviations from the law would not be tolerated and could even mean their replacement. Fear of criticism by the opposition that the government is backing down from its much- heralded reforms appeared to be the crucial factor in deciding to stick to the original timetable. The government’s main interest in introducing the law is to limit the huge losses of some utilities, which are largely due to inefficient management and waste. According to Economy Ministry data, the total outstanding debt of public utilities has risen to about 30 percent between 2003 and 2005, from 9.35 billion to 12.2 billion euros. Apart from major mismanagement, the utilities’ financial woes are also seen as part of the fact that they have long been treated as instruments of social policy by various governments. Almost one quarter of their debts are from government-backed loans, which amounted to 3.32 billion in 2005, up from 3.2 billion in 2004. Often such loans are not repaid by the utilities themselves, resulting in the government assuming the liability. The data shows that the accumulated balance of government-backed loans had reached 15.8 billion euros from 14.43 billion at the end of 2004. The new utilities law contains an indirect threat that government-backed loan guarantees will be cut in specific cases. A similar effort was made in the mid-1990’s, but the present government appears to understand that a complete end to guarantees is not feasible, as there are utilities that simply could not borrow without such guarantees and would have to close down. Economy Ministry data shows that Hellenic Railways Assocoiation (OSE) is the champion of indebted utilities; its balance amounted to 5.67 billion euros at the end of 2005, against a balance of 3.13 billion two years earlier. The Public Power Corporation (PPC) had the second largest debt; 3.8 billion euros in 2005, which was slightly lower than two years earlier, when it stood at 3.9 billion. The Athens Public Transport Organization (OASA) took third spot, its debt having risen 21 percent to 1.03 billion euros between 2003 and 2005. Furthermore, the aircraft repair utility Hellenic Aerospace (EAV) has provided increasing cause for concern, as its debt has skyrocketed 570 percent, from 70 million euros at the end of 2003 to an estimated 400 million last year. Last, but not least, the debt balance of EV0-PYRKAL, the armaments industry, has risen 407 percent within two years to 375 million euros. According to the law, each public utility has to draft a new internal operating regulations. New hirings will be done on seven-month trial contracts and will no longer provide for virtually permanent employment status. For existing staff, the new regulations will take the form of collective labor agreements, and will necessarily have to contain the following: – Basic pay raises will be given in a lump sum at the beginning of the year; for 2006, these will not exceed 3 percent. – Review and rationalization of all bonuses, compensations and payments in kind. – Overtime pay and compensation for participation in committee and working groups and traveling expenses must be lowered from last year’s levels. – The cost of early retirement programs is exclusively borne by the utility itself and not by the social insurance funds.