Athens: The Greek Cabinet decided that up to 28,000 public sector employees will be placed on 'reserve' - that is, suspended with reduced pay, by the end of 2011.
The program falls short of the 30,000 reduction demanded by Greece's creditors and, with few exceptions, it is actually an early retirement program on full pensions. Those affected will be paid a fraction of their actual salary for a period of one to two years, but will be able, at the same time, to hold jobs in the private sector, if they can find them.
"The approved proposal is the result of lengthy and difficult negotiations with (the lenders) who insisted that placing employees on reserve should have been a step towards firing them and not an early retirement" program, government spokesman Elias Mossialos said.
The government expects savings of euro 300 million from the plan in 2012.
The cabinet committed itself to reducing civil service jobs by 150,000 within four years.
The Finance Ministry on Sunday said that Greece won't meet 2011-2012 deficit targets imposed by international lenders as part of the country's bailout.
The country's deficit this year is expected to reach 8.5 per cent of gross domestic product, or $ 25.2 billion - higher than the targeted $ 23.1 billion, which would have been 7.8 per cent of GDP, the ministry said.
Greece has been reliant since May 2010 on regular payouts of loans from a $ 150 billion bailout from other eurozone countries and the International Monetary Fund. It was granted a second euro 109 billion package in July, but details of that deal remain to be worked out.
The Finance Ministry said the missed target was because of a deeper-than-expected recession, with the economy contracting by 5.5 per cent instead of the 3.8 per cent estimate made in May. It implied the deficit could even exceed this level by the end of the year unless all new austerity measures were implemented.
"The final estimate for a deficit equal to 8.5 per cent of GDP can be achieved, if there is a proper response by the state authorities and the citizens themselves, on whose stance the country's financial and social future depends," the announcement said.
The announcement reflects the government's frustration with tax collection, which they blame on tax inspectors' lax performance, and its fear that citizens, angry at seeing their wages shrink and, at the same time, having to pay an increasing amount of one-off taxes, would refuse to pay.
There are already widespread calls not to pay a property surcharge, to be included in the next batch of state electricity company bills, despite the fact that delinquent payers are threatened with having their houses disconnected from the grid. The government hopes that revenue from the property levy will raise about $2.7 billion in 2011 and a similar amount in 2012.
The 2012 budget is projected to reduce the deficit to $19.82 billion, or 6.8 per cent of GDP, up from the 6.5 per cent target agreed with Greece's lenders. Excluding serving Greece's debt, the budget is projected to have a primary surplus of euro 3.2 billion, or 1.5 per cent of GDP, meaning that Greece's debt will stop growing, as a per centage of GDP.
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