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Creditors finally pushed Greece to the wall to make reforms

28 January 2012 / 14:01:15  GRReporter
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The creditors finally found the right tone which they have to use while negotiating with Greece and explicitly and clearly laid down their conditions in order for it to receive the next financial aid package of 130 billion euro. The representatives of the supervisory Troika, Poul Thomsen from the International Monetary Fund, Klaus Masuch from the European Central Bank and Matthias Morse from the European Commission, showed this time their firmness and determination not to fall for some more vague promises of yet another Greek government. They requested immediate actions including:
- Reduction of the minimum wage in the private sector, which should reach the levels in Spain and Portugal. Poul Thomsen gave the example of other Eastern European countries neighbouring with Greece, that compete with very low labour costs;
- Elimination of the 13th and 14th salary;
- Elimination of the automatic increases in salary for years of service;
- Liberalization of the legal labour relations in banks and state enterprises;
- Reform of collective labour contracts;
- Change of the legal employment relations that should only be resolved between employer and employee;
- Reduction of social security;
- Reduction of additional pension benefits.

    Along with this, the supervisory Troika also asked for effective lay offs in the public sector, where 150,000 employees should be dismissed. Greek media called the claims of creditors "insulting" to the nation. Yesterday, Poul Thomsen, Matthias Morse and Klaus Masuch had a four-hour meeting with the Minister of Employment George Koutroumanis. They will visit him again today, Saturday, at noon. If they fail to convince him in their intransigence, there will be another meeting on Sunday. "You should immediately apply the measures that we are suggesting. You have been playing with the patience of creditors for the last two years". This was the message of the three men to Koutroumanis. He, himself has suggested alternative measures which would reduce the cost of labour in Greece by 12 per cent. This however, seemed insufficient to the supervisory Troika.
    Employers and unions failed to reach an agreement on these issues and the only way for them to be implemented is legislative. All parties in the Greek Parliament, however are against this and thus a law which provides for further reduction in salaries and pensions and for the dismissal of civil servants can not be passed. Greek MPs even went so far that three days ago they voted against the liberalization of opening hours of pharmacies. This infuriated Athens official creditors.
    German Minister of Finance Wolfgang Schaeuble stated at the World Economic Forum held in Davos, that for two years he has only been hearing from Greece, that it was decided to carry out reforms. "Now it is the time to execute them," he said. At the same forum, the executive director of the International Monetary Fund, Christine Lagarde, frankly admitted that she was disappointed by Athens and there simply have been no reforms in the last three months.
    The only good news for the Greeks came from the negotiations with the private creditors, where "significant progress in the technical and legal issues," has been noticed. This was stated in the official report of the Institute of International Finance. Negotiations between its Executive Director Charles Dallara and the Prime Minister Lucas Papademos continue also today, and the Minister of Finance Evangelos Venizelos is expected to have a formal notice of the agreement on Sunday. For the period of duration of the bond exchange, the country will be placed in the category "temporary failure". This was announced by the credit rating agencies.

Tags: supervisory Troika Poul Thomsen Greek debt economic crisis reform bankruptcy bonds
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