May 24, 2011 / 12:55 PM / 6 years ago

Greece must cut benefits to get aid: Germany CDU panel

BERLIN (Reuters) - Debt-laden euro zone countries should only receive further financial aid if they cut social benefits, a pro-business panel in German Chancellor Angela Merkel’s ruling conservatives said on Tuesday.

The economic panel of Merkel’s conservative Christian Democrats (CDU) said it was not enough for Greece to cut its retirement age to German levels.

Greek pensions are still around 94 percent of average Greek income, while Germans get only 40 percent, said panel head Kurt Lauk, who is not a member of Germany’s parliament.

The Bundestag, or lower house of parliament, has no say in the paying out of individual tranches of aid in Greece’s bailout agreed last year, but it would be involved in signing off on any further bailout for Greece.

“There can only be aid to bust countries if they pay lower social benefits than the giving countries,” said Lauk.

He also criticized Greece for having four times as many public servants as Austria, a country of similar size. At 39.6 percent Greece also recorded the highest increase in wages in the euro zone from 2000 to 2008, Lauk said. In Austria, wages only rose by 2.9 percent.

Greece kick-started a stalled privatization program on Monday and promised tougher austerity measures and tax hikes to meet EU/IMF conditions for the release of a 12 billion euro loan tranche in June, vital for keeping Athens afloat.

EU leaders declared they had adopted a comprehensive package to resolve the euro zone debt crisis in March, but that has not prevented contagion spreading, with Portugal requiring a bailout and markets piling pressure on Greece, Spain, Italy and Belgium.

“Greece must save, reform and most of all privatize,” Lauk said. Peripheral euro zone countries should only receive financial aid if they introduce rigid debt brakes into their constitutions, like in Germany, Lauk added.

Reporting by Mathias Sobolewski; Writing by Annika Breidthardt; Editing by Hugh Lawson

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