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Are Greek pink slips too little, too late?

A tourist walks in front of the temple of the Parthenon at the Acropolis in Athens on Monday.

YIORGOS KARAHALIS/YIORGOS KARAHALIS/REUTERS

In a break with a century-old taboo, Greece's cash-strapped government this week took an ax to the country's bloated -- and costly -- public sector, shedding about 14,000 civil servants.



The move is designed to save some €300-million by gently nudging oodles of state-paid staff into the unemployment line, footing 60 per cent of their pay for the following year before serving them with a pink slip -- and no severance pay -- in late 2013. About 20,000 more are set to follow on Jan. 1, and if that doesn't save enough money, authorities suggest, additional layoffs will ensue.



In a country where one in five salaries is paid by the government, the plan has drawn great controversy. On Tuesday alone, hundreds of civil aviation employees girdled their headquarters, occupying the building and its sprawling grounds at Hellenikon, south of Athens, in protest. No prior notices were issued, workers claimed; no other employment options or transfers were offered.

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True. But at this point, analysts warn, with the economy sinking further into a severe recession, the plan may prove too little, too late. Greece's fiscal derailment, they say, is so grim, and politicians in Athens have been so laggard and reluctant to implement key reforms, that measures like public sector layoffs will yield fewer results. The numbers speak for themselves: Despite rafts of brutal budget cuts, government revenues remain off target; down by 4.4 per cent. The country's budget deficit remains at a stubborn 9 per cent of gross domestic product this year, well above an original target of $22-billion. Tax evasion is continuing to drain the state of about $79-billion a year. And reports issued from the Organization of Economic Cooperation and Development revealed this week that Greece's economy is expected to shrink a striking 6.1 per cent this year -- among the worst recorded depressions in European history.



In October, Greece's million-strong unemployed outnumbered the county's 750,000 public sector workers as the country edged to the close of its fourth year of recession.



Still, with the euro zone hurtling towards a crash and European leaders scrambling once more to do whatever it takes to save the single currency, European finance ministers look poised late Tuesday to unblock $11-billion of international rescue aid to Greece to keep the tiny Mediterranean state from sinking in its near $500-billion of debt.



Like the public sector lay off plan, the anticipated release of the funds will not end Greece's financial woes. Athens, European leaders, the International Monetary Fund and private banks with Greek government bonds still have to hammer out details of a new financing agreement that will write down more than a third of its yawning debt and secure Athens with $170-billion in new rescue loans. It will be a long haul.



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