iOS app Android app More

Greek Unions, Employers Associations Reject Demands For Private-Sector Wage Cuts

Greece Austerity

ELENA BECATOROS and DEREK GATOPOULOS   02/ 3/12 06:55 PM ET  AP

ATHENS, Greece — "Crucial" issues remain to be resolved in Greece's critical negotiations over a second multibillion euro international bailout, and talks would continue into the weekend, the country's Finance Minister said early Saturday.

A long anticipated bond swap deal was now the easier part of the process in securing continued funding for the country, Evangelos Venizelos said after marathon talks with debt inspectors from the European Commission, the European Central Bank and the International Monetary Fund, known as the troika.

Venizelos said he would speak on Saturday afternoon by teleconference with the other eurozone finance ministers, and that the ministers would meet on Wednesday – a gathering that had originally been expected to be held Monday.

"After 12 hours of continuous and tough negotiations with the troika on the new program, we have solved quite a few issues. But there remain crucial issues which concern the future of the country and the Greek people," Venizelos said.

Greece desperately needs to secure the second bailout and the bond swap deal that seeks to halve its debt load in order to avoid a catastrophic default within weeks.

A major sticking point in the negotiations over Greece's second euro130 billion bailout are disagreements over the troika's demands for private sector wage cuts.

Apart from the new bailout talks, Greece is conducting urgent negotiations with its private creditors, who are being asked to lose half the face value of their Greek government bonds. New talks on the writedown – which would slash Greece's national debt by euro100 billion ($131.6 billion) – will be held in Athens over the weekend.

Venizelos said the negotiations on the bond swap "is now the easier part of the whole procedure."

In a letter to the government Friday, Greek unions and employers said they rejected proposals to slash the minimum wage and further cut annual salaries. Private sector workers have already suffered a 14 percent loss in income due to emergency taxes imposed since the beginning of 2010, the letter said.

The creditors argue that cutting labor costs is essential to making the Greek economy more competitive. The unions and employers' associations counter that the move will only further depress consumer spending and therefore tax revenue.

The government must conclude negotiations on its second rescue package "that will ensure debt sustainability of the country in the long run, and that will bring remedies to a number of serious problems that the Greek economy has had even before this crisis," said Amadeu Altafaj Tardio, spokesman for EU Monetary Affairs Commissioner Olli Rehn.

"And one of the main problems of the Greek economy as we have said time and again here is the chronic loss of competitiveness over the past decade. ... Therefore all the elements, including elements linked to the labor market, wage formation, are part of these discussions."

Dutch Finance Minister Jan Kees De Jager said he and his colleagues from the other three AAA-rated eurozone countries – Germany, Luxembourg and Finland – "are not satisfied with Greece's progress."

"We want a serious commitment from the Greek government and the opposition. They need to show concrete action as soon as possible," De Jager wrote on his blog after a meeting of finance ministers from the four triple-A countries in Berlin.

"The IMF rightly is demanding a reduction in the minimum wage and a major reduction in the number of civil servants," he said. "We will not agree to the second loan package until Greece has shown it is seriously working at this."

Without the new bailout deal, and the related bond swap to cut its privately-held debt, Greece would go bankrupt in late March, when it faces a euro14.5 billion bond redemption it cannot afford.

The Institute of International Finance, a Washington-based bank association conducting negotiations for the private creditors, said Friday that its senior official Charles Dallara would resume talks in Athens over the weekend.

IIF spokesman Frank Vogl said Jean Lemierre, senior adviser to the chairman of French bank BNP Paribas, will be accompanying Dallara.

Athens has said the writedown deal would see private investors take real losses of more than 70 percent through a 50 per cent cut in the face value of the bonds, along with lower interest rates and a longer repayment period than originally planned. It has also called for the ECB and national central banks to take part in the debt relief agreement, and indicated it was seeking a lower interest rate for the first bailout.

Greece has been surviving since May 2010 on rescue loans from a euro110 billion bailout package from other eurozone countries and the IMF. In return, it has pushed through tough austerity measures, including public sector salary and pension cuts and repeated rounds of tax hikes. Despite the measures, however, the country has failed to meet the targets set out in its bailout agreement, and now needs a combination of the bond deal and a second bailout to prevent a default that could roil the euro currency.

A meeting between Prime Minister Lucas Papademos and the heads of the three parties in his interim coalition government was expected to be held Saturday, according to government officials. The leaders must commit to the new agreements and whatever further austerity measures they entail for the deals to go ahead.

Speaking from Brussels, Tardio said that while negotiations were "extremely complex," he believed an agreement was within reach "in the days to come."

Venizelos stressed the decisions to be taken in the coming days were critical.

"We must save the country, we must now all together, united ... fight this battle. Tomorrow is the day of truth for all the political parties, for the country's political leadership."

___

Nicholas Paphitis in Athens and Mike Corder in The Hague contributed.

FOLLOW HUFFPOST BUSINESS
Subscribe to the HuffPost Money newsletter!
Filed by Harry Bradford  |