By: Dr. Mike Campbell
The Greek Prime Minister, Lucas Papademos, has failed to secure the support of the leaders of other political parties in the Greek coalition government for austerity measures attached to a second EU/IMF bailout package which is needed to prevent Greece from a disorderly default on its debts. The problem seems to be that no common position could be found on the thorny issue of pension reforms.
According to a statement released by the Prime Minister’s office, "there was broad agreement on all the programme issues with the exception of one, which requires further elaboration and discussion with the troika. This discussion will take place immediately, so as to conclude the agreement in view of the Eurogroup meeting".
So, the Greeks hope to start further talks with the troika (the European Union, European Central Bank and International Monetary Fund) immediately. European finance ministers were due to meet on Thursday afternoon and there had been considerable pressure on the Greeks to have the agreement approved in time for this meeting.
The deal that the Greeks were considering was said to require a 20% cut in the minimum wage from €750 to €600; a 15% cut in supplementary pensions (although primary pensions were also likely to be cut) and the cutting of a further 15000 public sector jobs by the end of the year. The somewhat controversial practice of paying employees a 13th or 14th month’s salary seems to have escaped unscathed. Whilst the practice may sound bizarre, it has long been accepted in Greece (and some other countries) and should be seen as part of the global employment package – however, it is often linked to productivity or some other incentive scheme.
Slightly better news emerged on Tuesday night from separate discussion between the International Institute of Finance (IIF), representing private sector investors, and the Greek authorities. IIF described the discussions as “constructive” and noted that its officials were returning to their headquarters in Paris for consultations. The talks are aimed at agreeing debt swaps which would write-off as much as 70% of current Greek debts.