ATHENS, Greece — Unions and employers' associations in Greece have rejected demands for private-sector wage cuts, despite pressure for the country to introduce strict austerity measures if it is to receive a crucial bailout package.
In a letter to the government Friday, unions and employers said they rejected proposals for the minimum wage to be slashed and annual salaries to be paid to Greek workers in 14 installments.
Wage costs have emerged as a major sticking point in negotiations between the government and rescue creditors from Greece's partners in the eurozone and the International Monetary Fund for a new bailout worth at least €130 billion ($170 billion).
Without that deal, and a related bond swap that seeks to cut the country's privately held debt, Greece would go bankrupt in late March, when it faces a €14.5 billion bond redemption it cannot afford.
Government spokesman Pantelis Kapsis said the bond swap deal, known as the Private Sector Involvement, or PSI, and the parallel negotiations with the eurozone, European Central Bank and IMF debt inspectors for the second bailout were almost complete.
"The PSI, I think, in its basic elements is ready," he told Real FM radio, adding that talks with the debt inspectors known as the troika were "in the final stage."
"Within the day, we will have to finalize a series of alternative proposals which will be put before the political (party) leaders so we can take the final decisions," he said.
People familiar with the talks on PSI have said that the deal would see investors take losses of more than 70 percent through a 50 per cent cut in the value of the bonds, a lower interest rate of between 3.5 per cent and 4.5 per cent on the bond and more time to pay back the debt.
A meeting between Prime Minister Lucas Papademos and the heads of the three parties in his interim coalition government was expected either Friday or Saturday, but no precise time or day was set by noon Friday.
Asked whether there was any alternative plan, Kapsis said that "there will necessarily be a Plan B" — but that he did not want to discuss what it might be.
"Clearly, if we don't close the deal and we let go and say 'we will default on our own," we would be heading to an open bankruptcy. But I don't think anyone supports that."
Greece has been surviving since May 2010 on rescue loans from a €110 billion bailout package from other eurozone countries and the IMF. In return, it has pushed through tough austerity measures, including public sector salary and pension cuts and repeated rounds of tax hikes. Despite the measures, however, the country has failed to meet the targets set out in its bailout agreement, and now needs a combination of the bond deal and a second bailout to prevent a default that could roil the euro currency.
Finance Minister Evangelos Venizelos warned that while the situation was difficult now, the alternative the country faced was catastrophic.
"We are not playing with fire when we are dealing with the fate of our people," he said in Parliament. "Yes, the people have become poorer. Yes, we are living a drama. Yes, our standard of living has gone down. Yes, it is dramatic to be obliged too cut wages and pensions. But what we could live through, and we are trying to avoid, is indescribable."
Elena Becatoros in Athens contributed.