ATHENS, Greece (AP) — Greek party leaders will seek Tuesday a long-delayed agreement on harsh cutbacks that bailout creditors demanded to save the country from bankruptcy but which have fueled nationwide outrage — a general strike snarled public services and thousands of protesters took to the streets of Athens.
Heads of the three parties backing the interim government will confer with Prime Minister Lucas Papademos on new salary cuts and job losses, which Greece’s eurozone partners and the International Monetary Fund want in exchange for keeping vital rescue loans flowing.
The Greek coalition parties were to be handed a draft agreement of the austerity deal before the meeting, a senior government official and a ranking coalition party member told the Associated Press, but gave no further details.
"The document will be given to political party leaders in the afternoon, it isn’t yet finalized, it’s still being drafted," the government official said.
They asked not to be named, citing the sensitive nature of the negotiations.
A general strike against the impending cutbacks stopped train and ferry services nationwide, while many schools and banks were closed and state hospitals worked on skeleton staff.
Riot police fired tear gas to repel hundreds of anti-austerity protesters who burned a German flag and tried to break a cordon outside Parliament, chanting "Nazis out!"
No arrests or injuries were reported and the clashes quickly subsided.
Police said some 10,000 people took part in an otherwise peaceful march to Parliament under heavy rain, organized by the two biggest labor unions. A separate demonstration by about 10,000 Communist unionists ended without incident.
"They are committing a crime against the country. They are driving wage-earners into poverty and wiping out pensioners and the unemployed," said Vangelis Moutafis, a senior member of Greece’s largest union, the GSEE.
"They are selling off state assets for nothing. This cannot continue. This crime must be stopped, right now."
On Monday, Papademos’ government caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, out of a total 750,000. The decision breaks a major taboo, as state jobs had been protected for more than a century to prevent political purges by governments seeking to appoint their supporters.
Athens must placate its creditors to clinch a €130 billion ($170 billion) bailout deal from the eurozone and the IMF and avoid a March default on its bond repayments.
Among the measures the EU and IMF are pressing Greece for is a cut in the €750 ($979) minimum wage to help boost competitiveness. This reduction would have a knock-on effect in the private sector — because private companies also base their salaries on the minimum wage — and even unemployment benefits. Unions and employers’ federations alike have deplored the measure as unfair and unnecessary.
Greece has been kept solvent since May 2010 by payments from a €110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.
As well as the austerity measures, the bailout also depends on separate talks with banks and other private bondholders to forgive €100 billion ($131.6 billion) in Greek debt. The private investors have been locked in negotiations over swapping their current bonds for a cash payment and new bonds worth 50 percent less than the original face value, with longer repayment terms and a lower interest rate.
Greek officials estimate private investors to take losses of about 70 percent on the value of their bonds.
The EU-IMF bailout will also provide an estimated €40 billion ($52 billion) to protect Greek banks from immediate collapse. Domestic lenders and pension funds hold some 34 percent of the country’s privately owned debt.
However, the bailout has to be secured for the deal with private investors to go ahead, as about €30 billion from the bailout will be used to pay investors in the bond swap deal.
A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal.
But on Tuesday, the EU commissioner Neelie Kroes, in charge of the bloc’s digital policies, said Greece’s exit wouldn’t be a disaster.
Kroes told Dutch newspaper De Volkskrant that "It’s always said: if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true."
She said Greece’s austerity drive so far left much to be desired.
"This is why the troika (IMF, EU and European Central Bank) is back in Greece again, reporting for the umpteenth time that Greece is not living up to its promises: too few savings, too few reforms," Kroes said. "It’s becoming a Greek mantra: ‘We cannot. We won’t’!"
But EU Commission President Jose Manuel Barroso bluntly countered the remarks.
"We are in a very decisive moment regarding the future of Greece and the future of the euro. We want Greece in the euro," he said.
"The costs of a default by Greece, the costs of a potential exit of Greece from the euro would be a lot higher than the costs of continuing to support Greece."
Greece’s coalition party leaders held a first key meeting on the austerity measures on Sunday, and postponed a second round of talks by a day so Papademos could complete negotiations with EU-IMF debt inspectors that ended early Tuesday.
The leaders have already agreed to cut 2012 spending by 1.5 percent of gross domestic product — about €3.3 billion ($4.3 billion) — improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them. The details remain to be worked out.
Creditors are also demanding spending cuts in defense, health and social security.
Finance Minister Evangelos Venizelos acknowledged the demands were tough, but on Monday called on coalition parties to work more closely together.
"To save Greece … will involve a huge social cost and sacrifices," Venizelos said. "On the other hand, if the negotiations fail, bankruptcy will lead to even greater sacrifices."
