International creditors told that mass layoffs out of the question with unemployment at European high of 27%
Greece was heading for a full-on collision with its international creditors on Sunday as Athens' uneasy coalition, struggling to meet the onerous terms of the country's latest bailout, ruled out layoffs in the public sector.
Flying into the capital at the start of a quarterly review of the debt-choked economy, mission heads from the EU, International Monetary Fund and European Central Bank were told flatly that mass firings were out of the question when unemployment had reached a European record of 27%.
"The public sector has shrunk by 75,000 people in the last one and a half years," the finance minister, Yannis Stournaras, told a newspaper in a taste of the stiff resistance the auditors are likely to meet. "There will be no layoffs."
The Eurogroup of finance ministers is expected to discuss the dire situation in Greece and Cyprus, which has asked for a bailout worth almost 100% of its national income.
Stournaras, a technocrat widely credited with smoothing often fraught relations between Greece and its foreign lenders, has encountered mounting hostility from within the tripartite government over the dismissals.
Athens agreed to cut 150,000 posts from its unwieldy public sector by 2015 as part of a wide-ranging package of austerity reforms promised when the "troika" unlocked €54bn in long overdue aid in December.
Under that plan, 25,000 employees were to be transferred this year to a "mobility" scheme, the first step towards redundancy. Streamlining so far has relied on a policy of natural attrition, with only one person being hired for every 10 who retire.
But the conservative-led administration has faced growing pressure from its leftwing junior partners. Acutely aware of the country's economic tailspin, Fotis Kouvellis, who leads the Democratic Left, has warned that with 1.4 million Greeks now unemployed, the prospect of yet more losing work could threaten the fragile social peace.
Mired in what economists are calling a "great depression", with its GDP set to contract for a sixth straight year, Greece is projected to see unemployment exceed 30% by the year's end as a growing number of businesses file for bankruptcy. Over 60% of those without work are under 25.
Public-sector firings are among a series of neuralgic points likely to be raised by the troika. Representatives, who indicated they would not be visiting Athens "to renegotiate its rescue package but supervise its economic performance", are also expected to address the thorny issues of progress on privatisations, tax administration reforms and bank recapitalisation.
Paitence is in short supply. Creditors have committed more funds to Greece – at €240bn, the biggest bailout in world history – than any other troubled economy since the tiny nation, revealing the unsustainable level of its public debt, triggered the eurozone crisis in late 2009.
Piling on the pressure ahead of the monitors' visit, the Euro Working Group chief, Thomas Wieser, emphasised that Athens had to keep its side of the deal. "All that was agreed in the bailout plan has must be implemented. These reforms were agreed to make the Greek economy stronger, flexible and more competitive," he told the Greek newspaper Realnews.
Although the IMF has publicly admitted that it seriously underestimated the impact of Greece's recession on its ability to deliver, there are growing concerns over the government's determination to crack down on tax collection – the single biggest drain on the country's economic performance.
A confidential report prepared by the EU and IMF and leaked to the Greek media last week showed that the nation was lagging severely in key revenue targets, with Athens' tax collection mechanism being singled out for particular criticism.
While Greece had managed to rein in public spending – pulling off the biggest fiscal consolidation of any OAED country – tax avoidance, particularly among high earners, remained "astounding", said the report, estimating that the unpaid tax of at €55bn amounted to nearly 30% of GDP.
Indicative of the febrile mood enveloping Greece, the radical left Syriza opposition party said that. in light of the missed targets, it was clear the coalition partners were preparing new wage and pension cuts. "They are discredited and dangerous," it railed in a statement. "The sooner they leave, the better for Greek society and the economy."
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