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Greece caves in, will cut 15,000 civil service jobs, amid pressure for debt deal
ATHENS, Greece (AP) ' Greece's coalition government says it has accepted demands by rescue creditors to cut 15,000 jobs in the public sector this year, under a new law that allows firings.
Public Sector Reform Minister Dimitris Reppas made the announcement Monday, as talks for huge new rescue deals to avoid a March default were further delayed.
The announcement signals a major 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.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
ATHENS, Greece (AP) ' Crucial austerity talks set for late Monday between Greece's coalition party leaders have been pushed back for a day, despite intense pressure from the European Union for a speedy agreement so that the country can avoid a default on its debt next month.
The Prime Minister's office said the delay is to allow completion of separate negotiations late Monday between Prime Minister Lucas Papademos and representatives of Greece's bailout creditors, who will first meet with Finance Minister Evangelos Venizelos.
Leaders of the three parties in Papademos' coalition publicly oppose steep cuts in private sector pay demanded by the eurozone and International Monetary Fund, which have angered Greek unions who called a general strike for Tuesday.
Creditors also want deep spending cuts in defense, health and social security, as well as layoffs of civil servants ' who mostly enjoy jobs guaranteed for life.
Papademos' office said party leaders agreed in a five-hour meeting late Sunday 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.
But the parties have disagreed on the fine details.
The government needs support from the majority Socialists, the Conservatives and the small rightwing populist LAOS party to seal a deal for a euro130 billion ($170 billion) bailout, coupled with a drastic writedown in the country's privately held debt. Both agreements have to be approved by Parliament.
Without either deal, Greece will be forced to default on its debt mountain next month as it lacks the cash for a euro14.5 billion ($19.1 billion) bond repayment due March 20.
"While we still believe that a voluntary Greek debt restructuring deal and further EU aid will be forthcoming, the risks of a more disruptive scenario have probably increased," said Vassili Serebriakov, an analyst at Wells Fargo Bank.
Earlier Monday, European Commission spokesman Amadeu Altafaj Tardio said Greece is already "beyond the deadline" to end the talks and should reach conclusions "around now."
The debt-ridden country has been kept solvent since May 2010 by payments from a euro110 billion ($145 billion) rescue loan package from its 16 eurozone partners and the IMF. When it became clear the money would not suffice, a second bailout was decided last October.
Its implementation depends on the austerity measures but also on separate talks with banks and other private bondholders to forgive euro100 billion ($131.6 billion) in Greek debt, in exchange for a cash payment and new bonds worth 50 per cent less than the original face value, longer repayment terms and a cut in the interest rate to be paid on the bonds. Those close to the negotiations expect private investors to take an overall cut of up to 70 percent on the value of their bonds.
Over the weekend, Greek officials held a conference call with eurozone finance ministers, as well as more talks in Athens with EU-IMF debt inspectors, senior bank negotiators, and political party leaders.
Greeks have already been subjected to a spate of austerity measures in return for the rescue loans, suffering significant cuts in pensions and salaries coupled with repeated tax hikes and an increase in retirement ages.
Angry at the prospect of fresh pain after two years of harsh austerity, the main GSEE labor union and the ADEDY civil servants' union called a 24-hour general strike ' the first of the year ' for Tuesday accompanied by a protest march in Athens. The walkout was expected to affect most public services and banks, although it was unclear whether flights would be disrupted.
Previous anti-austerity demonstrations have been marred by violence; in May 2010, three people died in an Athens bank torched by rioters.
An ADEDY statement said the proposed new cutbacks would "intensify the vicious cycle of recession and drive Greek society to despair."
Greece is in its fifth year of recession, while unemployment has hit record highs of about 19 percent.
"The current policy of austerity ... is turning workers into pariahs, jobless people and pensioners into paupers and deprives our youth of any hope," the statement said. "This policy has already pushed Greeks beyond their limits and must be stopped at any cost."
GSEE leader Yiannis Panagopoulos said the creditors' demands were a "chronicle of a death foretold."
"What is going on is not a negotiation," he said. "It's blunt, cynical blackmail targeting an entire people."
Left wing opposition parties are planning two separate protest rallies in central Athens at 6:00 p.m. (1600GMT) Monday against the proposed cuts.
Derek Gatopoulos in Athens and Raf Casert in Brussels contributed