Greek Prime Minister Lucas Papademos says the country faces “uncontrolled default” in March unless unions and employers can quickly agree on labour cost cuts to boost competitiveness.
At a round of meetings with social partners, Papademos said the labour issue would affect an EU-IMF evaluation of Greece’s economy later this month that will determine the conclusion of a debt-saving agreement for the country.
“Without the agreement and the funding linked to it, Greece faces an immediate danger of uncontrolled default in March,” Papademos warned.
“Social partners must exert a great effort in negotiations to improve competitiveness in the economy and boost employment,” the prime minister said on Wednesday.
“We cannot expect other EU states and international organisations to continue to fund a country that does not adapt to reality and does not deal with its problems,” Papademos added.
“Our actions and decisions in the coming weeks will decide everything,” the he said, calling for a conclusion to labour talks by the end of January.
Greece’s leading union earlier on Wednesday rejected calls to cut labour costs and insisted it would hold employers to existing wage agreements.
“We are not prepared to retreat even a single step on safety salaries for poor workers … we have signed an agreement, we call on (employers) to honour their signature,” said Yiannis Panagopoulos, head of the main private sector union GSEE.
The EU, the International Monetary Fund and the European Central Bank, which first rescued Greece from bankruptcy in 2010, have already asked the government to revise wage agreements in the private sector to boost competitiveness.
The government has until now resisted such calls, fearing a huge impact on unemployment at a time when nearly 900,000 people are already jobless, according to official figures.
But Papademos on Wednesday said Greece’s creditors have again raised “a series” of labour-related issues for revision, including the minimum wage – currently at just over 750 ($A948.05) per month – holiday bonuses and indexed pay rises.
“If we do not make important steps, if we do not make a good impression, the evaluation of our peers will not be positive,” he said.
“Tomorrow we risk being left with nothing.”
Papademos took over in November as head of a temporary coalition government tasked with finalising a eurozone debt-saving deal for Greece agreed in October, including a 50 per cent rollover of Greek sovereign debt in agreement with private creditor banks.
The October bailout also includes 130 billion euros in direct aid, of which 30 billion euros will be used to recapitalise Greek banks which have also taken losses resulting from the bond writedown.
Greece hopes to draw 89 billion euros from that package by February for its debt repayment needs and the bank recapitalisation process.
A May 2010 EU-IMF bailout loan of 110 billion euros, spread over three years, was accorded to Athens in 2010 and Greece has already received 73 billion euros of that money.
The government has not excluded adopting additional austerity measures to keep on track a recovery plan agreed with the EU and the IMF which has been undermined by a deeper-than-expected recession.