Lenders demand Greece to apply further wage cuts

ATHENS - Reuters

Greek Prime Minister Antonis Samaras. AFP photo

Political leaders in Greece have agreed on most of the austerity measures demanded by its creditors and are now eyeing wage cuts to find the final 1.5 billion euros of savings still needed, a source close to the talks said yesterday, Reuters reported.

Greece must find savings worth 11.5 billion euros for 2013 and 2014 to satisfy its increasingly impatient lenders who are currently on a visit to Athens to evaluate the country’s progress in complying with the terms of its latest bailout.

Prime Minister Antonis Samaras’s government last week managed to draw up a list of measures to achieve those savings, but the three parties in his conservative-led administration failed to agree on them, and are to due to resume talks today.

Lenders not convinced

“The political leaders don’t disagree on anything, there are just alternative proposals being discussed to protect those with low pensions or incomes in the public sector,” said the source, who is involved in the talks, according to Reuters. “We need measures worth 1.5 billion euros to finalise the 11.5 billion euro package.”

But the lenders have so far appeared far from convinced, and officials have told Reuters the country is likely to require a new debt restructuring that the eurozone - faced with market turmoil in Italy and Spain as well - can ill afford.

Greek media have reported that the country’s leaders are discussing possible layoffs of contractors in the public sector, a cap on pensions, cuts in welfare benefits, reductions in tax exemptions, and lower salaries for public employees as well as raising the retirement age by a year to make up for the shortfall in savings.

With a decision on a new tranche of aid to Greece not expected until September, the country’s already dire financial position appears to be getting increasingly precarious.

“The fact that we have not received the agreed aid installments has put pressure on our cash reserves. Until then, we are taking extra care in managing our cash,” Deputy Finance Minister Christos Staikouras told Real News weekly. The so-called troika of EU, European Central Bank and IMF lenders is due to wrap up its visit to Athens in the coming days and return in September to complete its assessment of whether Greece deserves more aid.

Meanwhile, Germany’s finance minister said in an interview published yesterday that he cannot see room for further concessions to Greece, insisting anew that the country must implement far-reaching reforms and cut its budget deficit. International debt inspectors are scrutinizing Greece’s finances and its progress in implementing unpopular budget cuts and reforms demanded in exchange for the rescue loan program that is keeping the country afloat.

Greek officials have called for more time to implement the measures, but patience among creditors is running extremely short. “The aid program is already very accommodating. I cannot see that there is still scope for further concessions,” German Finance Minister Wolfgang Schaeuble was quoted as telling the Welt am Sonntag newspaper.