Greece will miss its deficit target and will transfer some 30,000 public workers into a special labor reserve at reduced pay.
The talks between the Greek government and the troika have largely concluded, Greece’s deputy finance minister Pantelis Economou said on Monday, at the privately owned Mega television channel, The Wall Street Journal informs. He added that he expects the inspectors from the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB), all known as the troika, to conclude their visit by Wednesday.
Face-to-face talks between the Greek government and the troika resumed late last week after being suspended for more than a month amid a dispute over whether Greece would have to take additional austerity measures to meet its budget targets for this year and next.
Under pressure from the inspectors and its European partners, the government disclosed late Sunday that it would miss its 2011 deficit targets by about EUR1.5 billion, but would take some EUR6.6 billion in new austerity measures for 2011 and 2012 to bring its budget back on track with its goals. Later Monday, the Greek government was due to present its draft 2012 budget to parliament which foresees a budget deficit of EUR14.65 billion, roughly in line with its previous target of EUR14.9 billion. The troika officials were also due to meet with Greek opposition party leader Antonis Samaras later Monday. At stake is an EUR8 billion tranche of aid sought by Greece that is part of a EUR110 billion bailout the country received from its fellow euro-zone members and the IMF early last year. Without that next slice of aid, Greece’s government will run out of money by the middle of this month. Therefore, the Greek government acknowledged on Sunday that it will miss its deficit target this year, as it moved ahead with a plan to slash thousands of public-sector jobs to meet the demands of international creditors. Hereby, the Greek government called an extraordinary cabinet meeting Sunday to approve the 2012 draft budget as well as the job-cut plan, following three days of talks with a delegation of international auditors in Athens. The finance ministry said after the cabinet meeting that Greece’s deficit this year will be about 8.5 per cent of gross domestic product, or about EUR18.69 billion, well above a target of EUR17.1 billion. For 2012, Greece is aiming for a deficit of 6.8 per cent of Gross Domestic Product (GDP), or about EUR14.65 billion. The Greek economy, stumbling through its third year of recession, is expected to contract 5.5 per cent in 2011, deeper than a previous forecast of 3.9 per cent. Among the measures is a plan to transfer some 30,000 public workers into a special labor reserve at reduced pay. About two-thirds of them will be drawn from employees within a year or two of retirement and will qualify for early pensions, according to government officials. The reserve, to be implemented immediately, is expected to produce EUR300 million in annual cost savings, starting next year, and is the first step in a plan that aims to eliminate 100,000 public-sector jobs by 2015. According to the officials, from next year the Greek government will seek help from the European Commission, external consultants, and experts from the Organization for Economic Cooperation and Development to identify surplus workers in the country’s public sector. The reserve plan, described by union groups as the first step toward massive layoffs in the state sector, also comes amid internal dissent within the governing Socialist party and growing public opposition tothe austerity measures needed to keep rescue funds flowing. Finance ministers from the 17 countries that use the euro were due to meet in Luxembourg Monday, but aren’t expected to make a decision on Greece’s next aid disbursement until the troika has completed its latest report on Greece. A separate eurogroup meeting of finance ministers has been tentatively planned for Oct. 13 to approve the aid.
European stock markets have fallen on news that Greece is likely to miss targets to cut its deficit, the BBC informs.
The FTSE 100 fell 2%, France’s Cac had lost 3%, and Germany’s Dax fell 2.5%. Wall Street also opened lower. Hong Kong’s main index had earlier closed down 5%, and Australian shares by 2.7%. The euro was 1.3328 against the dollar, an eight-month low. Banking stocks were among the biggest fallers in Europe, on concerns about their exposure to Greek government debt. France’s Societe Generale was down 5.6%, BNP Paribas fell 6% and Credit Agricole dropped 4.5%. In Germany, Commerzbank fell 7.5%, while Deutsche Bank was 3% lower. In the UK, shares in Barclays were down 4.7% and Royal Bank of Scotland fell by 5%.