ECONOMY

Athens edging closer to aid plan

Greece appears to be moving closer to a multi-billion-euro rescue deal as the government warned workers yesterday of tough measures ahead which are needed to secure the assistance. Prime Minister George Papandreou met with union groups including the country’s two largest, GSEE and ADEDY, along with employers, to inform them of tough upcoming measures. «It’s a done deal, abolishing the 13th and 14th salaries, introducing a three-year wage freeze… raising VAT, as we were told [by the prime minister],» said Ilias Iliopoulos, general secretary of public sector union ADEDY, after the meeting with Papandreou. Sources said the government will allow businesses more flexibility in cutting staff numbers and will move ahead with further tax hikes on fuels, alcoholic beverages and tobacco products. Talks with officials from the European Union, European Central Bank and the International Monetary Fund on the conditions attached to the aid for Greece are expected to wind up over the weekend, with announcements likely on Monday. German Chancellor Angela Merkel, whose country would play a leading role in any support deal, made clear yesterday Germany would demand strict compliance in any deal. «Germany will help as soon – and I emphasize ‘as soon’ – as the conditions are met,» she said. Greece is in discussions on a package of up to 135 billion euros. In Brussels, Economic and Monetary Affairs Commissioner Olli Rehn said the EU should conclude talks with Greece within days. He gave no details of the package. The euro rebounded from a one-year low yesterday and Greece’s borrowing costs eased. The premium investors demand to hold 10-year Greek government bonds rather than eurozone benchmark German Bunds narrowed to 750 basis points from 800 bps at Wednesday’s close. Stocks on the Athens bourse rallied on Thursday, climbing more than 7 percent, with banks jumping 13.08 percent. National Bank, the country’s largest lender, soared 17.65 percent to 12 euros. Meanwhile, European Central Bank President Jean-Claude Trichet said yesterday that the eurozone must come up with a support package for Greece that mitigates the risk of problems spreading to other countries in the bloc. «What we need most at this time is a strong sense of direction. We need a sense of direction that can guide us on how we can emerge from these turbulent events,» Trichet said. Greece can’t be thrown out of euro Greece cannot be thrown out of the eurozone, German Finance Minister Wolfgang Schaeuble said on Thursday. A successful Greek budget consolidation program would avert a domino effect across the eurozone, Schaeuble said, but he added that failure in Greece would put the euro in question. According to opinion polls and street interviews, ordinary Germans might be annoyed at Greece for plunging the euro into crisis but opposition to a major Greek bailout may be waning. Germany had long been reluctant to back a multi-billion-euro rescue mechanism for Greece, partly because many oppose bailing out a country that appeared to be living beyond its means. But the reluctance appears to be abating as people fear that the crisis may worsen and damage the euro – a serious concern in a country with a historical aversion to financial turmoil. «People aren’t as worked up about the issue as some media want you to believe,» said Manfred Guellner, head of the Forsa polling institute. «Germans realize it’s only a loan and that it’s better to act now than regret inaction later.»