* Proposals target bonuses, some worth a month's pay
* Hikes to VAT, excise taxes, also under discussion
* EU/IMF deal expected to be finalised within days
(Adds PM quote 3rd paragraph)
By Lefteris Papadimas and Dina Kyriakidou
ATHENS, April 29 Greece will impose steeper
salary cuts and new austerity measures to clinch a three-year,
multi-billion euro aid deal and avoid default, union officials
said on Thursday, vowing protests.
Prime Minister George Papandreou met unions to discuss the
European Union and International Monetary Fund bailout, expected
to be finalised within days, to prepare the ground for what are
set to be unpopular measures.
"The immediate emergency measures will be a strong bridge to
cross over to great changes, secure the life of every citizen
and have dynamic growth in a more just society," he told his
"We will do whatever it takes to save the country," he said.
Unionists said Papandreou told them measures requested by
the EU/IMF team include abolishing Christmas and Easter bonuses
together worth two months' pay, a rise in VAT and other steps to
cut the budget deficit by 10 percent of GDP in 2010 and 2011.
"They want Greece to cut the deficit by 10 percentage points
in 2010 and 2011 ... so that Greece can go back and borrow on
markets in the third year of the programme," said one union
official who requested anonymity.
Revelations in October by the new socialist government
that the budget deficit was much bigger than expected launched
Greece into a debt crisis that is threatening global markets.
The initial 12.7 percent deficit of gross domestic product
for 2009 was revised to 13.6 percent last month, undermining
Greek targets to bring the gap below 3 percent of GDP by 2012 by
cutting it to 8.7 percent in 2010 and 5.6 percent in 2011.
Investors are closely watching the talks for details on
whether the aid will start in time for Greece to refinance an
8.5 billion euro bond coming due on May 19 and if the deal will
be big enough to handle Athens' 300 billion euro debt pile.
Greek bond interest rates have hit record highs as a result
of the crisis, making borrowing on markets prohibitive.
The euro zone member state has already cut public sector
wages, hiked taxes, frozen pensions and taken other steps to cut
the deficit by around a third this year, despite widespread
opposition from Greeks.
Sources close to the talks said earlier on Thursday the
measures being discussed include hiking Value Added Tax by 2-4
percentage points from 21 percent currently, and a rise of at
least 10 percent on fuel, tobacco and alcohol taxes.
"All these are on the table," said one of the sources, who
requested anonymity. "They are not final yet."
Union officials said a three-year public sector wage freeze
was also being discussed.
The elimination of Christmas and Easter bonuses, the
equivalent to 13th and 14th monthly salaries, would mean an
additional 10 percent cut in public sector base salaries over an
already agreed 4 percent cut, saving the state about 1.4 billion
euros a year.
"The talks are tough," government spokesman George Petalotis
told reporters. "No one can guarantee anything, we know how
difficult the country's situation is."
In Brussels, Economic and Monetary Affairs Commissioner Olli
Rehn said the EU should complete talks with Greece "within days"
on a financial aid package, conditional on Greece cutting its
deficit. He gave no details of the package. [ID:nBRU010773]
On Wednesday, Germany's Green party parliamentary leader
cited IMF chief Dominique Strauss-Kahn as saying the aid package
would be worth 100-120 billion euros ($133-160 billion) over
three years, with 45 billion euros expected in the first year.
Cuts were also aimed at Greece's system of public
wage allowances, which often include generous extra pay for
activities such as using computers or getting to work on time.
These are primarily meant to keep base salaries and pensions
low, and a 5-15 percent cut could save the state about 300
million euros a year.
More measures are bound to meet resistance. Opinion polls
show a majority of Greeks oppose outside aid and expect the
rescue package to hit living standards. Unions have pledged
strikes and many analysts fear violent protests come autumn.
"It's a disaster! The government has crossed the line," said
Despina Spanou, a member of the public sector union ADEDY board.
"We can't live this way. We will fight these measures with all
our might, because this is a battle for survival."
(Additional reporting by George Georgiopoulos and Renee
Maltezou; writing by Dina Kyriakidou; editing by Stephen Nisbet,