ATHENS – Bowing to pressure from international lenders, Greece on Wednesday moved to put more than 25,000 state workers on notice for dismissal by the end of the year in the first official winnowing of its costly civil sector.
The legislation, backed by 153 lawmakers in the 300-member Parliament, was needed to unlock rescue funds and ease fresh fears of fiscal derailment in the bailed-out country.
The workers will be given an opportunity to find other public employment, so the plan does not necessarily mean that all those who receive notice will lose their jobs.
Seven parliamentarians were absent and 140 voted against the bill, which broke a century-old taboo of public sector layoffs in a country where 1 in 5 salaries is paid by the government.
Though about 128,000 civil servants have sought retirement since the start of the crisis here, Wednesday’s late-night vote authorizes the first direct dismissal plan to hit the 700,000-strong public sector – a stark contrast to the 1,000 jobs lost daily in the private sector, according to state statistics.
Although widely anticipated, the outcome offers some respite for Prime Minister Antonis Samaras, who, in advance of the key vote, unveiled the country’s first major tax cut in an effort to placate public fury and political dissent. His weakened coalition drafted the contentious austerity plan after a leftist partner quit in protest last month.
Passage of the bill, which includes a rash of cost-cutting measures and a new luxury tax on owners of extravagant cars and exclusive homes, removes the biggest stumbling block in Greece’s desperate bid to secure about $4 billion between now and October to prevent its fiscal recovery from unraveling.
Greece has been at the epicenter of Europe’s lingering debt crisis, and its handling of the austerity program is being closely watched on the continent.
“Despite failing reviews, which some are claiming,” Samaras said in a surprise television address, “important progress is being undertaken and achieved in our country.
“We will not relax,” he added. “We cannot let up. We will reach the top.... Better days lie ahead.”
Samaras’ decision to slash the value-added tax in restaurants from 23% to 13% came as thousands of civil servants – some draped in blue-and-white Greek flags, others holding black balloons – gathered outside Parliament, waiting in the heavily guarded courtyard for the midnight roll-call vote.
Under a revised agreement reached with lenders this month, some 4,200 public sector workers, mainly teachers, school guards and employees from the administrative reform ministry, will either be laid off or put into a “mobility scheme,” under which they have nine months to find an alternative state job or face dismissal.
Some 12,500 additional civil servants will be bumped into the mobility scheme by September, and another 12,500 by the end of the year.
Unions leaders were meeting through the early hours of Thursday to decide on a new course of action and protests.
Locked out on international markets and limping along on bailout funds since 2010, Greece is in the third year of a long-term fiscal retrenchment and reform program inflicting growing pain on increasing numbers of people seeing their living standards plummet with virtually nothing to encourage economic growth in the near term.
With the economy forecast to contract an additional 5% this year and unemployment hovering at a record rate of 27% -- nearly 60% among Greece’s youth -- critics fear the mass layoff plan could backfire.
Last month, after Samaras shut down the country’s state broadcaster, costing 2,700 workers their jobs without notice, his junior, leftist coalition partner quit in protest, sparking a political crisis that brought the government to the brink of collapse.
Now pundits question whether the business-minded prime minister’s weaker coalition can enforce the unpopular reforms and steer the country to real recovery.
“This is the umpteenth law being passed in the [Greek] reform process,” said Takis Michas, a leading political commentator in Athens. “The problem, always, is implementation. And rather than do the job, Greece seems resigned to operating under the assumption that its European counterparts, mainly Germany, will come to the rescue.”
Just hours after the vote, German Finance Minister Wolfgang Schaeuble was due in Athens for a six-hour whirlwind visit.
Both he and Chancellor Angela Merkel -- the architects of European austerity -- have ruled out a fresh writedown of Greek debt. Still, officials in Athens and Berlin said the German finance minister was set to pledge some $130 million in much-needed funding for small and mid-size Greek enterprises struggling amid the financial crisis.
Small, family-owned businesses, once the driving force of the Greek economy, have seen their profits plunge in a market paralyzed by years of sagging consumption and tight lending rules by the country’s ailing banks.
State statistics show some 60,000 enterprises are expected to close this year, adding to the 160,000 that have gone bust since the start of the crisis.
For the record, 9:27 p.m. July 17: An earlier version of this post said Greece's prime minister repealed the country's first major tax cut ahead of the vote; it should have said he unveiled it.
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