Anger over austerity among ordinary Greeks is matched by bailout fatigue among north European creditor countries, especially Germany, Finland and the Netherlands, which are taking the toughest line on strict conditions for more money.

The European Union and International Monetary Fund increased pressure on Athens to deliver on pledges to slash its deficit even as the economy heads for a fourth year of recession. The IMF has told Athens this week to cut the public workforce and payroll, shut inefficient state entities, fight tax evasion and sell billions of euros of state property to plug its budget gap. A set of austerity measures to be applied immediately, were announced by the government this week as it tries to convince the International Monetary Fund, the European Central Bank and the European Commission, known collectively as the troika, that it is serious about meeting its fiscal targets and should receive its next loan tranche.

After a cabinet meeting lasting some seven hours, government spokesman Ilias Mossialos set out in a written statement the steps to be taken, pending Parliament’s approval in the next few days, to reduce Greece’s deficit. “These choices send the message to our partners and the markets that Greece wants and is able to fulfil its obligations, always remaining in the central core of the euro and the European Union.”

The Cabinet decided the tax-free threshold on income should drop from 8,000 to 5,000 euros. It also approved a unified pay structure for the public sector, whose details were not announced. The government will not touch state pensions below 1,200 euros but anybody in retirement earning above that threshold will see the extra amount reduced by 20 percent. Any pensioners under 55 will have anything they earn above 1,000 euros reduced by 40 per cent. Some 30,000 public sector workers will be placed in a labour reserve by the end of the year, according to the plans announced.

This means they will earn a reduced salary for a limited period before the government has the right to sack them or re-employ them. In his statement, Mossialos also said the Cabinet had approved several structural reforms and privatisations but did not give any details. He said a new tax code would be presented to Parliament next month in a bid to rectify “inequalities and injustices that have existed for decades.”

The government hopes these measures will be enough to convince top troika officials, who will be back in Athens next week, that Greece should receive its next loan instalment of 8 billion euros. Without it, the state will run out of money by the middle of October. Speaking in Parliament before the cabinet meeting, Finance Minister Evangelos Venizelos admitted that a series of failures and the worsening recession made it necessary for the government to go on a new austerity drive.

“Do we have to take additional measures? Yes we have to take supplementary measures… because of the recession, because of the difficult task, and the weakness of the central administration have not produced the required results,” he said, while adding that the troika’s presence in Greece was necessary if the country wants to improve its public finances. “If we did not have the supervision of the troika… we would have again unfortunately slipped off the fiscal track,” he said. “It’s not a question of intent. It’s a matter of mentality, lack of ability, management structure, methods, habits and inertia.”

PUBLIC FRUSTRATION

Public protests against the cuts have dwindled since early this year when Athens saw bloody clashes between police and rioters, but frustration is growing again as the crisis worsens. “They have crippled us,” said 44-year-old public sector employee Niki Playannakou, a single mother.

 “We accepted the cuts last year, we put up with some things for the sake of the country. But as time goes by we don’t see things improving. How much can a family take?”

On Tuesday evening, Finance Minister Evangelos Venizelos began a second phone call in as many days with EU and IMF inspectors -known as the “troika” – on austerity measures. Greek government officials said a first call on Monday had been “productive and substantive” and they expected to clinch the release of an eight billion euro aid tranche despite consistently missing the conditions that were set.

The IMF/EU mission had abruptly left Greece on September 2 in a disagreement over the extent of the slippage, and what Athens must do to make good on its pledges. Officials close to the troika said the IMF/EU monitors would need to return to Athens to seal any agreement. “They have to come to Athens to conclude,” one official told Reuters, on condition of anonymity. Officials close to the troika had said before the call that Greece needed to flesh out details of how to prevent slippage from next year’s budget deficit target of 6.5 per cent of GDP.

Athens also denied a report in the Kathimerini daily that Prime Minister George Papandreou was considering holding a referendum on whether Greece should tackle its debt crisis within the single currency or leave. The government has long said it is planning a referendum this autumn on political reforms, but has repeatedly denied that it would concern euro membership. “No. We haven’t discussed such an issue, definitely not,” deputy government spokesman Tolkas said.

Source: Reuters