Greece will suspend more civil servants than originally planned and impose new pension cuts as part of more austerity measures, the government said Wednesday, as it tried to persuade international creditors to continue bailout payments needed to avoid a chaotic default.
Government spokesman Elias Mossialos outlined the new spending cuts after a 6 1/2 hour Cabinet meeting, the outcome of which was being watched closely by nervous global markets.
"This choice sends a message to our partners and the markets that Greece both wants and is able to fulfill its commitments and remain at the core of the eurozone and the EU," Mossialos said in a statement.
The new measures include increasing the number of civil servants to be suspended on partial pay to 30,000 by the end of this year from 20,000. Mossialos said this amounted to a total of about 3 percent of public sector staff.
Greece has been under pressure from its international lenders to meet fiscal targets and slash the size of its bloated public sector. The country has more than 750,000 staff in the country of 11 million people.
Under the new measures, monthly pensions above euro1,200 ($1,636) will be subject to a 20 percent cut of the amount above the euro1,200 threshold, while pensioners below the age of 55 will see a 40 percent cut in the amounts of their pensions above the euro1,000 limit.
The tax-free limit on annual income will drop to euro5,000 ($6,818) from euro8,000 ($10,908), and the cut will be applied to this year's income, Mossialos said.
"It is the fundamental and strategic choice of the country to return to fiscal independence as an equal member of the eurozone, achieving a primary surplus as soon as possible," he said.
The prospect of more tax increases and spending cuts are likely to be met with mounting concern in a country mired in a deep recession and with the number of unemployed rising to around one in seven. Greece's two largest labor unions already called earlier Wednesday for another general strike on Oct. 19. All public transport in the capital will halt on Thursday as transport workers hold a 24-hour strike.
Greece has been dependent since last year on rescue loans from a euro110 billion bailout extended by other eurozone countries and the International Monetary Fund to prevent it from defaulting on its debts. The country undergoes a quarterly review by the IMF, European Central Bank and European Commission, known collectively as the troika, to ensure it meets its targets before each loan disbursement.
But the troika suspended its last review earlier this month amid talk of delays and missed targets. Finance Minister Evangelos Venizelos held two nights of conference calls with the heads of the delegations Monday and Tuesday, and the troika is due back in Athens to complete its review next week.
Unless they sign off on the next euro8 billion batch of loans, Greece will default on its debts in mid-October.
The announcement of the new measures came after Venizelos briefed Parliament on the results of his conference calls with the troika.
The government will also speed up privatizations, and reforms opening up closely regulated professions to more competition _ both areas for which the country has come under criticism by its lenders for delays.
Earlier this month, the government had already announced a new property tax in a hurried attempt to plug a budget gap. The new tax will be paid through electricity bills to make it easier for the state to collect, but the plan could run into problems as the power company union has threatened to refuse to collect the money.
Elena Becatoros in Athens contributed.