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Greece on track with reforms, IMF, EU say

June 17, 2010

ATHENS, Greece (AP) — Debt-ridden Greece is on track with the reforms required as part of the rescue package that saved it from bankruptcy, a delegation from the International Monetary Fund, European Central Bank and the European Commission said Thursday.

The delegation was in Athens to review progress in the austerity measures the government has been implementing in order to pull the country out of a financial crisis that brought it to the brink of default last month.

“The program is on track on all the dimensions, the main dimensions of the program,” the European Commission’s Servaas Deroose said during a news conference in the Greek capital, adding that progress had been made in the budget, structural reform and financial sector requirements.

The delegation said the deficit was lower than had been projected and the government was adhering to firm spending control.

“Fiscal developments are positive with central government revenues coming in closely as expected and with firm expenditure control in the state budget,” the delegation said in a joint statement, adding that based on preliminary data to the end of May, “the state budget deficit was lower than was projected in the program.”

The team, which arrived in Athens on Monday and was leaving on Thursday, is to return in late July for a full review of Greece’s progress in the three-year €110 billion ($136 billion) package of rescue loans from the IMF and other EU countries that use the euro as their currency.

Greece received the first installment of loans in May, just in time to prevent default and repay government bonds that were maturing. It is to receive the next in September if the July review — the first formal review — shows it is still meeting its targets.

The team’s preliminary assessment “suggests that when we come back ... and undertake a comprehensive analysis, that we will find that program is on track,” said Poul Thomsen, the IMF’s mission chief for Greece.

To secure the funds, the center-left government has taken austerity measures that aim to make its bloated public sector less wasteful and its shrinking economy more competitive. It has pledged to cut its massive budget deficit from 13.6 percent of gross domestic product in 2009 to 2.6 percent in 2014.

The reforms, which include overhauling the pension system, raising retirement ages, cutting civil servants’ pay and raising consumer taxes, have met with a backlash from labor unions, who have staged a series of strikes and demonstrations.

A communist party-backed labor union has called for a protest rally Thursday evening, a day after the government unveiled a draft presidential decree making it easier for companies to fire workers by raising the number of layoffs allowed and enabling lower compensation payments.

Under the Labor Ministry’s proposed reforms, the number of workers that companies employing more than 150 people can fire will be increased to 5 percent of the work force per month from the current 2 percent. Smaller companies will be able to lay off a maximum of six workers.

The draft decree also slashes the notice period a company is required to give an employee being fired from the current 24 months to four months. If workers are given full notice, employers will pay half the compensation required for sudden layoffs.

New figures released Thursday showed unemployment hit a 10-year high in the January-March period, reaching 11.7 percent compared to 9.3 percent in the first quarter of 2009. A total 47,000 jobs were lost compared to a year earlier.

Unemployment was highest in the 15-29 age group, where it reached 22.3 percent.

Metro workers have also staged two 24-hour strikes on Wednesday and Thursday in support of about 285 colleagues whose contracts are expiring and face losing their jobs. Their union said they will also walk off the job on Friday, leaving the capital without a subway system for the third day.

All public transport in Athens ground to a halt for five hours Thursday as bus, tram and trolley workers walked off the job to protest social security reforms, snarling traffic in the city center.


Associated Press writer Nicholas Paphitis in Athens contributed to this report.