Greece: reform struggles or death throes?

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Greece: reform struggles or death throes?

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As angry public service workers protested again outside the Finance Ministry in Athens inside they were still struggling on Friday to come up with a formula to save the country from bankruptcy.

Finance minister Evangelos Venizelos again met the officials who control the bailout money in a bid to agree details on wage cuts and bank recapitalisation that then have to be approved by the country’s political leaders.

In parliament he pleaded for support saying: “Yes, the people have become poorer. Yes, we are living dramatic times. Yes, the standard of living has fallen. Yes, it is tragic to have to cut pensions and wages. But the alternative of what we may face is unthinkable, and that is what we’re trying to avoid.”

Prime Minister Lucas Papademos has said they are in the final phase of a plan to “restore fiscal stability, improve competitiveness, revive the economy and increase employment,” but the newspaper headlines talk of Greece in front of an EU and International Monetary Fund firing squad.

Without a deal on cutting repayments on its government bond swap and on the bailout, Athens risks default when 14.5 billion euros of bonds fall due in March.

Investors fear this could in turn sow panic across financial markets and push the global economy back into a recession.

To reduce labour costs, the troika of European Central Bank, European Union and International Monetary Fund lenders want Greece to make holiday bonuses in the private sector optional and cut the minimum monthly wage set at about 750 euros now.

In a sign that implementing the reforms will be difficult even with political approval, Greek employers and unions said further salary cuts were non-negotiable and instead proposed reducing taxes and social contributions.

The main private sector union GSEE also rejected employers’ proposal for a wage freeze in 2012 and 2013.

“Competitiveness on a national level is affected more by factors like bureaucracy — which is fed by complex regulation, state intervention, the tax system, corruption and anti-business mentality rather than wage costs,” the employers and unions said in the joint letter to Papademos.