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Greece due to unveil plan to sack state workers

Oct 2, 2011, 1:37 a.m.
Doctors and medics march during a protest in central Athens September 30, 2011. REUTERS/John Kolesidis

By Lefteris Papadimas

ATHENS (Reuters) - Greece was expected to unveil its plan on Sunday to begin laying off state workers, the most contentious part of a reform package demanded by the EU and IMF to free up loans and stave off bankruptcy.

Without the release of 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.

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

A senior member of the ruling coalition in Germany, Europe's paymaster, said it may be necessary for Greece to abandon the euro, a prospect European governments officially reject as beyond consideration.

Negotiators from the International Monetary Fund, European Union and European Central Bank, known as the troika, have returned to Athens after walking out of talks a month ago, and have met Greek officials for the past four days.

To persuade the troika to release the loans, the government has promised to introduce new taxes, cut state wages by an average of 20 percent and reduce the number of public sector workers by a fifth by 2015.

The austerity measures are deeply unpopular, and public sector unions hope that strikes and demonstrations can wreck the Socialist government's resolve to enact them.

No part of the package is more contentious than the plan to lay off state workers -- who make up a fifth of the Greek workforce and are guaranteed jobs for life under a constitution that bans firing government employees in virtually all circumstances.

The cabinet was due to meet on Sunday evening to discuss a plan to begin layoffs by setting up a "labor reserve." Under the plan, 30,000 workers would be put in the reserve by the end of this year and paid 60 percent of their salaries for a year, after which they would be dismissed.

The government has yet to announce how the programme would work, including details such as whether it would be used to push out younger workers or only to accelerate the retirement of workers already reaching pension age.

Greek officials said late on Saturday a solution was close.

"We are close to a deal on the labor reserve," one senior official said after several hours of difficult talks on the issue. "We want to conclude negotiations with the troika on the labor reserve by tomorrow and also approve it in a cabinet meeting tomorrow."

The troika inspectors want assurances that the plan will be implemented swiftly and will not only include civil servants close to retirement, the official said.

POOR, MIDDLE CLASS HURT

Greeks hostile to the austerity measures say the harsh cuts will deepen the impact of a three-year recession and disproportionately hurt the poor and middle class.

Labor unions hope to step up political pressure with a campaign of strikes and protests in coming weeks. The government has a majority of just four seats in parliament and could be forced into elections if a handful of lawmakers balk.

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