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Greek ministers work against clock to implement severe budget cuts

With debt repayment deadline less than five weeks away, Papademos battles to fulfil creditors’ conditions

Debt-stricken Greece is battling against the clock to implement the drastic budget cuts needed to convince finance ministers from the eurozone to finally sign off its €130bn lifeline at Monday’s crucial meeting.

With Greece less than five weeks away from the date when it has to meet debt repayments of €14.5bn, the government of Lucas Papademos worked furiously over the weekend to fulfil conditions demanded by its “troika” of creditors, the EU, European Central Bank and International Monetary Fund.

The full gamut of fury over budget measures that have cut pay and pensions by up to 40 % was on display in Syntagma square where demonstrators gathered in front of parliament. The plaza – the arena of ferocious clashes between riot police and protestors a week ago – was festooned with banners decrying the “memorandum [agreement] of wretchedness.”

“Neither this government nor any of the politicians in that building,” said Kostas Berses, 55, pointing to Athens’ sandstone parliament, “were invested with the power to pass such undemocratic measures. They have reduced us to a poverty house where nothing is resolved and every day despair just grows. Greeks want to be able to decide their own luck, their own fate.”

Papademos – who took the unexpected step of flying to Brussels – had signalled after a cabinet meeting on Saturday that he would introduce two pieces of emergency legislation to convince lenders of Greece’s willingness to enact reforms. The legislation is expected to include wage and pension cuts, and a supplement to the 2012 budget which already foresees €3.2bn in savings.

“It has been impossible not to cut pensions,” said Papademos, a former vice president of the European Central Bank, appointed to the post last November with the sole purpose of averting a potentially disastrous default by the euro zone member.

Ministers also worked to sign off reforms ahead of their submission to parliament this week.

Highlighting what was at stake, the authoritative Sunday Vima newspaper said the government had ten days to apply 79 far-reaching reforms that would not only overhaul but modernise the outmoded Greek economy.

“The package of measures that … parliament will have to approve in the next ten days will enforce a violent adjustment on the Greek economy and society,” it declared on its front page.

Greek officials expressed “cautious optimism” that the complex loan agreement would finally be sealed at Monday’s eurogroup meeting.

The rescue package also includes a bond swap with the private sector which will slice an estimated €100bn from Greece’s €350bn debt mountain. On Sunday insiders said while almost complete, the deal still required “a few finishing touches.”

Money is also being put into a specially-protected (escrow) account to guarantee debt interest repayments – a key German demand – but the government has rejected Berlin’s proposals for EU-appointed “commissars” in each spending ministry.

“We are cautiously optimistic that the bailout will be closed. But you never know. There’ve been a lot of surprises,” said one government official.

“A lot of good cop, bad cop stuff has been going on in Berlin,” he said of recent statements made by German politicians over Athens’ fiscal performance. “The Troika has made clear that we also have to meet conditions. It’s crucial we fulfil them. There’s no room for mistakes.”

The latest measures include opening up “closed-shop” professions, forging ahead with the immediate privatisation of state-owned assets, slashing collective wage agreements, reducing public expenditure on medicines and regulating the labour market.

Tardiness in applying structural reforms has been widely blamed by the EU and IMF for the failure of its rescue program in Greece so far.

Despite the crushing effects of austerity, however, a new poll showed that Greeks still remained fervent champions of their country’s European outlook with almost 76 % keen to remain in the euro zone and not return to the drachma. © 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