ATHENS – Saying that “the numbers don’t add up,” for Greece to make 11.5 billion euros ($14.16 billion) in cuts ordered by international lenders to keep lifeline loans coming, Finance Minister Yiannis Stournaras said the new coalition government is ready to bring back the idea of laying off thousands of public workers.
Stournaras said they would be put into a so-called Labor Reserve Pool for one year and be forced to take a 40 percent pay cut. The government led by Prime Minister Antonis Samaras’ New Democracy Conservatives, partnered with the PASOK Socialists and Democratic Left, had vowed to protect public jobs but now has reportedly backtracked, as it did on the notion of renegotiating the terms of bailouts with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB.)
The Troika is providing $152 billion in rescue loans for Greece, with the last installment of $38.8 billion due next month but is withholding a second bailout for $173 billion until the government administers more austerity and additional reforms, including privatization of state enterprises and the sale or lease of state-owned properties.
After a meeting with President Karolos Papoulias, Stournaras admitted the government may have no choice but to re-introduce the labor reserve pool that was discussed by a previous government but abandoned after fierce opposition from labor unions. The workers would likely be fired after a year of reduced pay as the Troika has said Greece is lagging in its required goal to reduce the public sector workforce by 150,000 in the next two years.
Stournaras said Greece is finding it difficult to make the additional cuts. “We will look at the labor reserve because the numbers just don’t add up easily,” he told reporters. He added that, “11.5 billion euros is a significant number and we haven’t reached it yet. We still need to fine 3.5 to 4 billion euros ($4.34-$4.96 billion (of cuts,)” added Stournaras, who told Papoulias there was still “hope” for Greece.
Although numbers have come down, there is concern that targets will be missed unless the labor reserve scheme, which was abandoned last year, is revived. “The labor reserve scheme will be re-examined as the numbers do not add up,” a senior government source, who did not rule that more people may follow in coming years, told Kathimerini.
The decision presents a dilemma for the government as it said it would not force layoffs even as it plans to merge and close many entities. The details of the first round of some 8 billion euros ($9.94 billion) in cuts is expected to be revealed on Aug. 10 but only about 6.5 billion euros ($8.07 billion) has been agreed up so far. Another 3.5 billion euros ($4.34 billion) must be set by Aug. 20.
The Defense Ministry has planned for cuts of 2.6 billion ($3.22 billion) while the Health Ministry’s ambitious target of 1.5 billion euros ($1.86 billion) is said to be off by at least 1 billion euros ($1.24 billion) over the next two years. Kathimerini said that the Labor Ministry is considering rolling back by one year the time of retirement for those that were due this year and in 2013, staggered cuts in all pensions over 700 euros ($869) monthly, a further reduction in retirement lump sums and the abolition of Christmas and Easter bonuses, all of which the government had also said it would not touch but is reportedly set to renege on those promises as well.