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Greek debt deal falters, unions call general strike

-Reuters photo

ATHENS: A debt rescue for Greece hit a last-minute snag over pension cuts on Thursday while eurozone ministers waited to decide on a package averting default and unions called a strike against the terms.

Officials said Greece now had two weeks to find a solution, and Finance Minister Evangelos Venizelos flew to Brussels with an incomplete deal on additional budget action which has left Greeks aghast.

Public anguish at the new round of cutbacks was deepened by new dire unemployment data.

“I leave for Brussels with hope that the Eurogroup (of finance ministers) will take a positive decision concerning the new aid plan,” Venizelos said.

The sticking point was “the reduction of pensions,” a government source told AFP after marathon talks which broke up in the early hours of Thursday.

No further meetings were expected on the issue ahead of the 17-member Eurogroup meeting due to open at 1700 GMT in Brussels, the prime minister's office said.

Greece now has until Sunday to come up with 300 million euros in spending cuts for this year to seal a deal with its official lenders, a senior eurozone official told Dow Jones Newswires.

“It doesn't matter where the 300 million euros come from, it doesn't have to be pensions it can be a totally different part of spending,” the official said.

The main private and public-sector unions called a 48-hour general strike on Friday and Saturday to fight “barbaric” new wage and pension cuts.

“We categorically reject this framework to impoverish and bankrupt society and the economy,” the leading union GSEE said, as official data showed the jobless rate exceeding a million people, or 20.9 percent of the workforce.

The three coalition partners in Prime Minister Lucas Papademos' government held nearly eight hours of talks overnight on a rescue plan for the debt-strapped Greek economy, and agreed on all “points of the plan except one”, the PM's office said.

The austerity measures are demanded for the release of new loans under a 130-billion euro bailout plan agreed in October.

The 625-million-euro shortfall to correct slippage from targets agreed with Greece's public creditors -- the EU, IMF and the European Central Bank -- will be partly made up from defence cuts, said Panos Beglitis, spokesman of the socialist Pasok party which is part of Greece's government coalition.

“A two-week period has been given for us to find the remaining 300 million euros,” Beglitis told AFP. “But this is holding up the PSI,” he added, referring to a debt swap with private creditors that is an integral part of the bailout.

The bailout is vital to prevent Greece, a eurozone member, from defaulting on 14.5 billion euros of payments to bond holders due on March 20.

Private creditors, who are negotiating a write-off of Greek debts worth at least 100 billion euros, are to meet on Thursday in Paris, according to a spokesman.

Greece has run up total debt of about 350 billion euros, roughly 160 percent of its gross domestic product, and the IMF has insisted that level be brought down to a maximum of 120 percent of GDP in 2020.

All eyes are on Greece amid fears a failure to meet its debt obligations could spark a domino effect that undermines the entire euro common currency project.

Representatives of the EU, IMF and European Central Bank, which have been organising the bailout loans for Athens, went straight into talks with Papademos after the coalition negotiations, a government source told AFP.

According to the Greek press, the measures under consideration included slashing the minimum wage by 22 percent, sweeping cuts to salaries and pensions and 15,000 public sector job losses.

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