Greek PM To Meet With Labor Union, Business Reps

Published January 4, 2012 9:36AM (EST)

ATHENS, Greece (AP) — Greece's prime minister was to hold discussions Wednesday with labor unions and trade federations ahead of a crucial visit by the country's debt inspectors while Athens negotiates the terms of a second multimillion euro international bailout.

Lucas Papademos' series of meetings with the main union representing private sector workers, as well as with trade, commerce and enterprise federations, were expected to tackle sensitive issues such as collective wage agreements.

The meetings come a day after government spokesman Pantelis Kapsis warned that Greece could have to leave the euro if it fails to finalize the details of the euro130 billion ($169 billion) bailout and that more austerity measures may be needed.

Debt inspectors from the International Monetary Fund, European Central Bank and European Commission are expected in Athens in mid-January. Collectively known as the troika, the inspectors have previously said Greece needs to reduce its labor costs as part of efforts to make the country more competitive.

Greece has been kept solvent by an initial package of euro110 billion ($142 billion) bailout loans, which began being disbursed in May 2010. In return, the government imposed deeply resented austerity measures to contain a bloated budget deficit, including cutting salaries and pensions and introducing repeated tax hikes. The measures have led to frequent and often violent demonstrations over the past two years.

Despite the austerity, it soon became clear that the initial package would not be enough to definitively save Greece from a messy default, and a second rescue package was agreed in October. However, key details of that deal are still being negotiated — most crucially a provision under which private creditors such as banks and investment firms would take a 50 percent cut in the face value of the Greek bonds they hold.

Greece has been struggling to get private creditors to agree to key aspects of the haircut, which is has to implement ahead of the March 20 maturity date of euro14.4 billion worth of bonds. Athens would not be able to make the repayment without the second bailout, while the bond writedown would also reduce and delay the amount that would be due.

The Institute of International Finance, which has been leading the negotiations on the debt restructuring on behalf of Greece's private creditors, said late Tuesday that some progress had been made in the discussions in recent days. However, indicating the urgency of finding a solution, the IIF stressed a deal had to be found "in the days ahead."

Negotiating the details of the second bailout and ensuring Greece gets the funds is the main mandate of the temporary coalition government headed by Papademos, a former central banker appointed in November after a political crisis forced the country's socialist prime minister to resign.

On Tuesday, Kapsis warned Greece would be unable to stay in the euro without the new bailout deal.

"This famous loan agreement must be signed, otherwise we are outside the markets, out of the euro and things will become much worse," he told private Skai TV.


Gabriele Steinhauser in Brussels contributed to this story.

By Salon Staff

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