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Papademos Says Greece Faces Collapse in March Without Cuts

Greece's Prime Minister Lucas Papademos
Lucas Papademos, Greece's prime minister. Photographer: Jock Fistick/Bloomberg

Greek Prime Minister Lucas Papademos told business and union leaders today the economy could collapse as soon as March if the country doesn’t accept income cuts as a key means to secure agreement with international creditors on more financing.

Papademos said keeping the country’s “greatest achievement,” its use of the euro, means boosting competitiveness and creating conditions for more jobs and a return to growth.

“We have to give up a little so we don’t lose a lot,” Papademos said, according to an e-mailed transcript of his statements. Talks to resume this month with representatives of the European Union, International Monetary Fund and European Central Bank, the so-called troika, will focus on “shaping a credible economic adjustment plan for 2012 to 2015.”

“Without this agreement with the troika and subsequent financing, Greece in March faces the immediate risk of a disorderly default,” he said.

Appointed in early November to lead an interim government to secure a second financing package for the country, Papademos is racing to complete a voluntary swap of debt with private bondholders, part of the new rescue plan for the country, which also includes 130 billion euros ($168 billion) of public funds. The country redeems 14.4 billion euros of bonds on March 20.

Issue Range

Papademos said the troika had pointed to a range of issues to be tackled. They include adjustments to the minimum wage, abolition of Christmas and summer vacation bonuses and automatic wage increases.

Yannis Panagopoulos, the head of Greece’s biggest private-sector union group GSEE, said he was willing to discuss how to reduce non-wage costs and actions to protect jobs.

The organization won’t consider changes to national labor accords such as cutting the minimum wage and the so-called 13th and 14th wages, Panagopoulos said in comments televised live on state-run NET TV.

Greece’s debt is forecast to balloon to almost double the size of its shrinking economy this year without the write-off, the European Commission estimates. The swap is supposed to help reduce debt to 120 percent of gross domestic product by 2020.

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