Leaders set for last round of talks on reforms

The leaders of Greece?s three coalition parties are due to hold final talks with Prime Minister Lucas Papademos on Tuesday to finalize the terms of a new bailout after government officials spent Monday scrambling to find several billion euros? worth of savings to satisfy the country?s lenders.

Papademos had been due to meet with PASOK?s George Papandreou, New Democracy?s Antonis Samaras and the leader of Popular Orthodox Rally (LAOS), Giorgos Karatzaferis, on Monday but the meeting was put off as the parties finalized their positions and the government attempted to convince representatives of the European Commission, the European Central Bank and the International Monetary Fund — collectively known as the troika — that it can carry through the measures being demanded.

The troika held talks with Papademos and Finance Minister Evangelos Venizelos on Sunday night in an attempt to set out the cuts that Greece will make to reduce public spending by 1.5 percent of gross domestic product, or 3.3 billion euros. Sources said that there appears to be an agreement so far on how roughly 2.5 billion euros will be saved. 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. The remaining 850 million euros in cuts are due to be agreed on Tuesday. The list will then be put before the party leaders for their approval.

Another issue the leaders will have to finalize following their initial talks on Sunday night is the level of the reduction in the minimum wage. A cut of 20 to 22 percent to the 751 euros per month (gross) that about 300,000 Greeks receive has been proposed. The three leaders seemed to accept this on Sunday 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.

This means that employers would be free to negotiate individual deals with their employees. Given that the minimum wage will be the basis for these new deals, hefty salary cuts are expected. This will also have a negative impact on revenues and social security contributions.

Meanwhile, Administrative Reform Minister Dimitris Reppas said that 15,000 jobs will be cut from the civil service by the end of this year — the first step toward the elimination of 150,000 public sector jobs the government has pledged to the troika.

Reppas chose his words carefully when making the announcement but did not rule out the possibility of civil servants on permanent contracts losing their jobs. He did however lay emphasis on plans to merge and abolish state entities. Sources said the sackings are likely in the next two months.