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State job cuts on table at Greek loan talks

Oct 1, 2011, 5:33 a.m.
Doctors and medics march during a protest in central Athens September 30, 2011. REUTERS/John Kolesidis

By Lefteris Papadimas

ATHENS (Reuters) - Greek officials held talks on Saturday with EU and IMF negotiators to free up urgently needed bailout loans, but the government and the lenders were reported to be at odds over how to meet a promise to lay off state workers.

Without a deal to release an 8 billion euro ($10.7 billion) tranche of an EU bailout, massively indebted Greece could run out of money to pay state wage bills within weeks.

To secure the bailout, the Greek government has promised to impose tax hikes, slash public sector wages by an average of 20 percent and cut the number of state workers by a fifth by 2015.

European officials are scrambling to avert a Greek debt default, which could wreck balance sheets of European banks, damage the prospects of the euro single currency and possibly plunge the world into a new global financial crisis.

Negotiators from the International Monetary Fund, European Union and European Central Bank, known as the troika, left Greece a month ago saying they were not convinced Greece could carry out the necessary spending cuts and tax hikes.

The negotiators returned this week after getting written assurances that the government would implement the measures. They met officials, including Finance Minister Evangelos Venizelos, on Saturday for a third day of talks.

JOBS FOR LIFE

The Greek constitution guarantees jobs for life to all state employees, making the promise to cut payroll numbers a legal and political minefield.

Greece has promised to start layoffs by putting 30,000 state workers in a "reserve" by the end of this year. Workers in the reserve would be paid 60 percent of their salaries for a year and then be dismissed if they cannot find new jobs.

The Ta Nea daily newspaper said troika officials were "disappointed" with talks on the plan so far, concerned that laid-off workers could go to court and win their jobs back.

The government has yet to give details about how it would decide which workers would be shunted into the reserve. Ta Nea said the troika was worried that only older workers already near pension age would go into the reserve, effectively turning it into an early retirement plan that would save little money.

A high-ranking government official, requesting anonymity while the talks are still under way, told Reuters workers near retirement would be among those moved into the reserve, but some younger workers would also be affected.

"We are examining putting people close to retirement into the reserve, but not only those people," the official said. "The troika has said to us repeatedly that this (reserve plan) has to be 'real' and not 'virtual'."

The Greek government is expected to adopt a decision on the reserve plan at a cabinet meeting on Sunday, when it will also discuss the budget for next year.

The austerity measures are deeply unpopular. Opponents say such harsh cuts will deepen the impact of a three-year economic crisis, and disproportionately hurt the poor and middle class.

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