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Euro Zone Approves Fresh Aid for Greece Europe Keeps Pressure on Athens
(35 minutes later)
ATHENS — After a week of tense negotiations, Greece and its foreign lenders agreed on Monday on a new round of austerity measures that must be taken by the country to unlock further crucial rescue aid, and the finance ministers of the euro zone countries signed off on the deal. ATHENS — Euro zone finance ministers decided on Monday to keep up pressure on Greece for reforms by continuing to drip-feed payments of emergency aid, even as Greeks took to the streets once again to protest the austerity plans of a government still wobbly after skirting collapse last month.
Greece’s international creditors – the European Commission, European Central Bank and International Monetary Fund – cited “important progress,” referring specifically to an overhaul of the tax system and a recapitalization of Greek banks that is “nearly complete.” But they noted that policy implementation was “behind in some areas.” As many as 5,000 Greeks, including hundreds of angry police officers on motorbikes, joined protests on Monday against renewed calls by international creditors to cut 15,000 civil service jobs, and to put thousands of public workers on reduced wages ahead of possible dismissal, in a country where unemployment already tops 27 percent.
At a news conference Monday, the Dutch finance minister, Jeroen Dijsselbloem, said euro zone finance ministers made the disbursement of 2.5 billion euros ($3.2 billion) in aid to Greece conditional on the country meeting a set of reform commitments by July 19, with a further disbursement in October. The mayor of Athens was hospitalized briefly Sunday night after workers assaulted him as he left a meeting to discuss municipal layoffs, and the mayor of Greece’s second-largest city, Salonika, threatened to quit on Monday rather than face deeper cuts.
In addition, the ministers agreed that profits of about 2 billion euros made by the European Central Bank on the purchases of Greek bonds would be given to Greece in two disbursements, according to Mr. Dijsselbloem, who also serves as the president of the group of euro area finance ministers. The protests have flared after a period of relative calm in Greece and revived questions about the ability of Prime Minister Antonis Samaras to carry out the cuts being demanded — and indeed about the very survivability of his government.
The negotiations between Greece and its international creditors had faltered last week on Greek pledges for cuts to civil service, a sensitive measure that nearly brought down the government last month after Prime Minister Antonis Samaras unilaterally shut down the state broadcaster, ERT. The move, which put some 2,700 employees out of work, prompted the junior partner in the three-way coalition of political parties to quit. International creditors have already granted more than 200 billion euros, or $257 billion, in financial assistance to the euro zone’s crisis-hit countries, but the demands for deeper reforms that have accompanied the aid are badly dividing the government in Greece, as well as those in Italy and Portugal.
After much horse-trading, Greece and its creditors agreed on a procedure to put 12,500 civil servants into a so-called mobility program, where staff would receive a reduced wage for several months before being moved to another public sector post or dismissed, according to a government official who asked not to be named because of the confidential nature of the talks. Athens has also pledged to lay off a total of 15,000 civil servants by the end of next year. Last week, the government of Prime Minister Pedro Passos Coelho of Portugal, considered something of a model nation by international markets and creditors, nearly came apart as support waned for the austerity program he was charged with implementing in exchange for Portugal’s 78 billion euro bailout.
Reports that thousands of employees of the capital’s municipal police force would be included in the plan prompted local workers to walk off the job on Monday. On Sunday night, the mayor of Athens, Giorgos Kaminis, was slightly injured after being assaulted by protesting workers while leaving a meeting on the cutbacks with visiting mayors from other Greek cities. He reshuffled his cabinet over the weekend after Finance Minister Vítor Gaspar quit abruptly last week.
Although the negotiations on the civil service overhaul attracted the most media attention and speculation, the talks between government and troika officials focused on a range of issues. These included a budget gap of around 2 billion euros for 2013 and 2014, which officials have reportedly found ways to plug, chiefly through the control of spending in the health sector. Government officials said they would submit to Parliament a “multi-bill” with all the agreed-to changes now that the euro zone finance ministers have approved them. Top of the agenda at the ministers’ monthly gathering in Brussels was how much of the next batch of a promised 8 billion euros in emergency aid they should release to Greece.
At a news conference in Brussels on Monday, the Dutch finance minister, Jeroen Dijsselbloem, said euro ministers decided to make a disbursement of 2.5 billion euros to Greece, with a further disbursement of 500 million euros in October, on the condition that the country meets a set of reform commitments by July 19.
In addition, the ministers agreed that profits of about 2 billion euros made by the European Central Bank on the purchases of Greek bonds would be given to Greece in two disbursements.
Rather than pay the bulk of Greece’s aid in a lump sum, the ministers stuck to a plan to stagger the aid in order to keep up the pressure on Greece to reform what they say is a bloated and inefficient public sector. There was little hint of relief on the horizon.
“The path for Greece will remain a difficult one,” said Wolfgang Schäuble, the German finance minister, ahead of the meeting. “I would warn against any illusions.”
Despite the evident anger in the streets in Greece, representatives of Greece’s so-called troika of lenders — the International Monetary Fund, the European Central Bank and the European Commission — made clear that they expected the Greek government to do more, including curbing excessive spending in health care.
But the Greeks have little choice but to comply. Three years after the government’s debt crisis blew a hole in its public finances and threatened to knock the country out of the euro zone, Greece remains dependent on two aid packages of 240 billion euros.
Payments to Greece of smaller amounts of bailout money began late last year, when lenders began pressing for tighter control in exchange for disbursements following serious concerns the country was backsliding on reforms like dismantling protected sectors of the economy.
One strategy ministers were discussing on Monday evening was to slice one component of the aid from European governments worth 4.8 billion euros into two or three parts, and to impose further strictures on Greece that must be met before the end of the month for those slices to be released in full, or in part.
A final decision on the aid could be made in a teleconference later in July, according to Euorpean Union diplomats with direct knowledge of the discussions.
But it is proving increasingly difficult for Mr. Samaras to balance the demands of Greece’s creditors against the anger and exhaustion of the public, and to straddle the widening divisions the austerity program is causing within his fragile governing coalition.
Nearly a year after he was elected to a four-year term, Mr. Samaras was forced to reshuffle his government on June 24. The junior coalition partner, Democratic Left, withdrew to protest an earlier decision by Mr. Samaras to shut down the state broadcaster, Hellenic Broadcasting Corp. The step set off a political firestorm in Greece after he issued a unilateral decree to eliminate some 2,600 jobs.
Beyond the cabinet reshuffle, the plan badly backfired. Employees at the broadcaster, known by the acronym ERT, have continued to occupy their massive headquarters in northern Athens every day, pumping out underground broadcasts of various news and culture programs through surreptitious satellite feeds. Over the weekend, protest banners plastered the facade, declaring the firings illegal and stating employees’ refusal to go.
The incident underscored just how difficult it is for any Greek government to cut the ranks of its bloated civil service, especially with unemployment at a record 27.4 percent and youth joblessness at a staggering 60 percent. Most state employees are protected by the constitution, but even those who are not may prove difficult to fire.
As part of the government reshuffle, Mr. Samaras replaced several cabinet members, including the previous job-cuts czar, Antonis Manitakis, a constitutional scholar whom Mr. Samaras had tapped to oversee the streamlining of the civil service.
In an interview last month, Mr. Manitakis spelled out challenges of refurbishing Greece’s civil service, which is littered with a number of long-time employees who got jobs through favoritism or jobs-for-votes schemes.
Of the 150,000 government job cuts sought by the troika since 2010, 128,000 have been achieved, but only through retirements. Until the attempt to shut down ERT, Greece had not fired a single government employee.
But as long as the troika continues to demand 15,000 job cuts, more social friction may be inevitable. The hundreds of municipal police officers who joined protesters on Monday waved banners calling on the troika and the government to “go home.”
The government will also move ahead with a procedure to put 12,500 civil servants into a so-called mobility program, giving staff members reduced wages for several months before moving them to another public sector post or firing them, according to a government official who asked not to be named due to the confidential nature of the talks.
The Athens mayor, Giorgos Kaminis, issued a statement following his hospitalization blaming the head of the local authority workers’ union, Themis Balasopoulos, for instigating the assault, accusing the unionist of “longstanding involvement in the client-patron system of local government.”
In a hasty escape broadcast on Greek television, Mr. Kaminis was escorted away from the scuffle and jumped on the back of a waiting motorcycle to flee the scene after assailants broke all the windows on his car.
Although the negotiations on the civil service overhaul attracted the most media attention and speculation, the talks between government and troika officials focused on a series of issues, including a budget gap of around 2 billion euros for 2013 and 2014, which officials have reportedly found ways to plug, and on Greek demands for the lowering of a value-added tax on restaurants to 13 percent from 23 percent.
Government officials said they would submit a “multi-bill” with all the agreed reforms in Parliament for approval as soon as the Euro group gives the green light.

James Kanter reported from Brussels.