Greece to unveil lay-off plans ahead of key EU meet

Greece was expected on Sunday to unveil plans to trim its bulging civil service and meet one of its creditors' key demands a day ahead of a eurozone meeting that could free up an eight-billion-euro loan. The 17 countries that share the debt-challenged euro currency will meet in Luxembourg on Monday in an effort to reach an agreement on releasing the bailout tranche which has been blocked by the IMF for the past month. Divided eurozone ministers will seek to avert a Greek default, which could send stock markets into a panic, deal an unprecedented blow to the European currency and bring the world back to the brink of a fresh financial crisis. On Sunday afternoon, Greek Prime Minister George Papandreou was to chair an emergency cabinet meeting to finalise the details of a scheme aimed at shrinking the public sector. Following consultations with EU and IMF auditors, the government now seems to have fixed on a scheme to place 30,000 civil servants temporarily in a "labour reserve".  Finance Minister Evangelos Venizelos said the government had developed the scheme effectively laying off state workers with "transparent and objective" criteria. "It creates the lowest possible social cost and places on a 'reserve' those who in comparison can more likely cope with the difficulties of this new situation," Venizelos said in an interview with the Sunday edition of newspaper "To Vima". Greek civil servants' jobs are protected by the constitution, hence the controversial idea of a "labour reserve" -- where those close to retirement could be placed on a lower wage. Antonis Samaras, the leader of Greece's main opposition New Democracy party, complained however that the government had rejected a more efficient labour reserve plan. "With our proposal the deficit will be reduced by 850 million (euros) the first year and four billion the fifth. According to the government's proposal the deficit will decrease by 614 million the first year and three billion the fifth," he wrote in the same newspaper. EU-IMF auditors returned to Athens on Thursday, four weeks after they abruptly left, having noticed new spending discrepancies by the Greek government and disappointed at the lack of progress in implementing promised structural reform measures. They spent the weekend trying to obtain the most accurate, up-to-date picture of Greece's finances and forecasts, after protests, including staff occupations of ministries, meant a slow resumption of negotiations last week. EU economic and monetary affairs commissioner Olli Rehn will give ministers the inside track in Luxembourg Monday on what the Washington-based IMF wants to do, as looming recession risks turning Greece's crisis into global catastrophe. Austrian Finance Minister Maria Fekter told Germany's Welt am Sonntag newspaper she thought the eurozone was likely to grant Greece a new slice of aid. "The likelihood that the next eight-billion-euro ($11-billion) slice of aid will be paid out to Greece is, in my view, clearly higher than the likelihood it will not be paid," she said. "It should not be the case that the payment of individual tranches of aid become a battle every three months because Greece threatens to fall short of the conditions," she added. Athens is labouring under a crushing 350 billion euros or more of debts, with its stripped-bare economy already on its knees, and the government says it needs the loans to pay salary and other bills this month. A top official from Chancellor Angela Merkel's Bavarian sister party suggested Sunday that Greece ought to solve its economic problems outside the eurozone, as Europe's paymaster remained divided over the Greek crisis. "I think it is a solution, if you want to bring Greece back to stable competitiveness, that they do so outside the eurozone," Alexander Dobrindt, general secretary of the CSU party, told German radio. He added that if Greece failed to convince an international team of auditors of its reform efforts to secure more aid, then the EU's rescue fund, the EFSF, "should also have the right to organise the exit." The United States and other major economies are showing growing signs of concern that Europe is too divided to solve the Greek problem or deal with problems in the much bigger Italian economy, and adequately re-capitalise banks that lose heavily in the event of default. Outside Europe, the fear is that a ricochet effect could charge through global financial markets already on a downer as data increasingly points towards renewed recession. Many want the 440-billion-euro ($590 billion) European Financial Stability Facility's legal status changed to that of a bank, so it could "leverage" much more firepower.