By DEREK GATOPOULOS and NICHOLAS PAPHITIS, Associated Press
ATHENS, Greece (AP) — Greece's coalition government caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, amid mounting international pressure to agree on austerity measures needed to secure major new debt agreements.
The announcement Monday signals a shift in Greece's policy, as state jobs have so far been protected during the country's acute financial crisis, which started about two years ago. Public Sector Reform Minister Dimitris Reppas said the job cuts would be carried out under a new law that allows such firings.
Unions have called a 24-hour general strike for Tuesday, in response to the new austerity measures, while about 4,000 protesters braved torrential rain late Monday to join protest rallies organized in central Athens by left-wing opposition parties.
Greece is racing to push through the painful reforms — which have yet to be agreed to by Greece's coalition partners — to clinch a euro130 billion ($170 billion) bailout deal from its European partners and the International Monetary Fund and avoid a March default on its bond repayments.
Debt-ridden Greece has been kept solvent since May 2010 by payments from a euro110 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 euro100 billion ($131.6 billion) in Greek debt. The private investors have been locked in negotiations over swapping their current debt for a cash payment and new bonds worth 50 percent less than the original face value, longer repayment terms and a cut in the interest rate to be paid on the bonds. Greek government officials say they expect private investors to take an overall cut of up to 70 percent on the value of their bonds.
However, the EU-IMF bailout has to be secured for the deal with private investors to go ahead as about euro30 billion from the bailout will be used as the cash payment in the bond swap deal.
Greece's coalition party leaders pushed back a key meeting on the austerity measures by a day until Tuesday, due to the ongoing negotiations with EU-IMF debt inspectors who were locked in talks with the government Monday.
The leaders have already agreed to cut 2012 spending by 1.5 percent of gross domestic product — about euro3.3 billion ($4.3 billion) — improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them.
Creditors are also demanding spending cuts in defense, health and social security, a cut in the minimum wage, as well as the civil service layoffs, as European pressure increased on Greece to make more concessions.
The government has promised to reduce the 750,000-strong broader public sector by 150,000 by the end of 2015, but has so far insisted it could reach that target through staff attrition.
"We are opposed to indiscriminate firings," Reppas said. "The work force reduction is strictly connected with the restructuring of services and organizations at each ministry."
Officials at the Public Sector Reform Ministry gave no details of the new plan, nor would they say how many of the job cuts would be compulsory.
European Commission spokesman Amadeu Altafaj Tardio said Greece is already "beyond the deadline" to end the talks.
After talks in Paris with French President Nicolas Sarkozy, German Chancellor Angela Merkel said there can be no bailout deal unless Athens implements creditors' proposals.
"(The proposals) are on the table," she said. "And time is pressing. Therefore something has to happen quickly."
"Time is pressing and for the entire eurozone much is at stake," Merkel added.
In Athens, talks between the government and debt inspectors from the EU, IMF and the European Central Bank — known as the troika — dragged into early Tuesday.
"The negotiations with the troika are ongoing for the new loan program. It is clear that there is a lot of pressure being put on the country. A lot of pressure is being placed on the Greek people," Finance Minister Evangelos Venizelos said during a break in the talks.