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Greek PM pushes through cuts deal

Lucas Papademos secures agreement on policies including 22% cut in minimum wage and 15,000 public sector redundancies

At almost the twelfth hour Athens has done it again: with all eyes in Europe’s major capitals focused on it, the country appeared to pull back from the brink early on Thursday morning and instead choose to adopt furiously unpopular austerity measures in return for the rescue loans that are keeping its economy afloat.

In one set of marathon talks after another, the technocrat prime minister Lucas Papademos managed to rally support for the excruciatingly painful policies that will dominate Greek life for the best part of the next decade.

At times this week it has looked like an impossible task. Papademos, an avuncular academic, is no aficionado of the hurly-burly of Greek politicking. The constant delays and repeated missed deadlines of negotiations that Greece’s EU partners had hoped would be wrapped up on Monday, had infuriated him.

The bickering among the party chiefs backing his interim coalition peaked on Wednesday night when a final round of talks – lasting seven hours – were constantly interrupted by the refusal of the leaders to endorse cuts in pensions.

The issue, which remains outstanding, will not be the last.

The 50-page draft agreement outlining the terms on which Greece can expect to receive rescue loans was much harsher than any of the politicians had envisaged.

A cursory read shows that it contains some of the most savage cuts in modern Greek history with the minimum wage being reduced by 22%. From €750 a month it will be brought down to €585 – a drop that in turn has been quick to enrage trade unionists and is bound to elicit widespread, and possibly violent, protests in the weeks and months ahead.

Supplementary pensions were to have been dropped by 15 % – on top of the barrage of tax increases, wage and pension cuts over the past two years. The government has also agreed to lay off 15,000 public sector employees by March.

On Wednesday, the European statistics agency, Eurostat, announced that one in three Greeks live under the poverty line – up from one in five before the crisis.

The squabbling is not going to go away. Tensions between Greece and its foreign lenders are still very raw.

Entering the prime ministerial building ahead of the marathon talks, Georgios Karatzaferis, leader of the small populist Laos party, spoke of an atmosphere of “blackmail” in which politicians had been forced to make decisions under extraordinary pressure.

“Time is [being used] as a blackmailing factor by our creditors,” he said, highlighting the mood of mistrust between Greece and foreign lenders. “And that is a problem for me.”

Indicative of the mistrust, debt inspectors, who have spent the past three weeks in intense talks with Papademos and the Greek finance minister Evangelos Venizelos, have insisted on seeing each one of the leaders, separately, following their endorsement of the plan.

A clause specifying their strict adherence to the agreement in the months and years ahead was also inserted into the accord. Insiders said troika representatives would use the meetings to “ram home” the message that it is “agreement, 100% complying with the rules, or default”.

“The package was much heavier than any of the leaders thought,” said one well-placed official. “I don’t think intellectually or psychologically they were prepared for what they have to accept or the sort of austerity that needs to be imposed. They’ve lived in a fantasy world refusing to believe the figures and thinking fiscal problems could be easily solved.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds