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Greece to vote on tough salary, pension cuts

Elena Becatoros, Associated Press

Greek Prime Minister Lucas Papademos arrives for a cabinet meeting at the Greek Parliament in Athens, on Tuesday, Feb. 28, 2012. Greek lawmakers are to vote on a package of tough salary and pension cuts as part of measures needed to secure the payout of the debt-ridden country's second international package of bailout loans. (AP Photo/Petros Giannakouris)

ATHENS, Greece (AP) -- Greece's government on Tuesday rushed to push through legislation detailing tough pension and salary cuts needed to secure access to the country's second international package of bailout loans.

Lawmakers are due to vote late Tuesday night on public sector pension cuts and other savings measures aimed at bringing the budget back in line with targets. Ministers, meanwhile, decided to apply labor reforms, such as cuts to the minimum wage, retroactively to Feb. 14.

Parliament must push through the final bills before the country can receive any funds from its new euro130 billion ($174 billion) package of rescue loans from other eurozone countries and the International Monetary Fund.

The bailout, and accompanying bond swap deal with private creditors, are meant to save the country from a potentially catastrophic default that could drag down other financially vulnerable countries and threaten the European Union's joint currency, the euro.

The rescue package is Greece's second in less than two years. The country has been surviving since May 2010 on funds from a first bailout from the eurozone and IMF, and has received euro73 billion ($98 billion) from the initially approved euro110 billion ($147 billion) package.

But more than two years of harsh austerity implemented to secure the rescue funds have taken a hefty toll on the Greek economy, with businesses closing in the tens of thousands and unemployment at a record high 21 percent.

"It is dramatic to cut someone's pensions. ... But why do we have to take these measures? Because our budget is still running at a loss," Finance Minister Evangelos Venizelos said in Parliament. "We are still adding debt to our debt. And if we do not start to generate a primary surplus next year, that will be catastrophic."

Measures include a 22 percent cut in the minimum salary, currently at euro751 ($1,010) per month, for private sector workers, and a 32 percent cut for workers under the age of 25, who now face an unemployment rate of 48 percent.

Limits are also being imposed on collective wage agreements and the process of labor arbitration, with some measures to remain in effect until overall unemployment falls below 10 percent.

Lawmakers are to vote again on Wednesday on another bill implementing cuts that have previously been announced.

The new wave of austerity measures, coming on top of two years of spending cuts and tax hikes, have sparked widespread anger among a public that has seen its income and living standards drop with no clear end to the crisis in sight.

On Tuesday, about 100 uniformed police, coast guard and fire service unionists protested pay cuts outside Parliament, with a small group burning a wartime military German flag used in the Nazi era in 1935-1945.

Prime Minister Lucas Papademos, a technocrat heading Greece's temporary coalition government, is to head to Brussels for a meeting Wednesday with European Commission chief Jose Manuel Barroso.

Greece's European partners have been pressing the country to implement the measures it has already passed, after repeated delays and missed targets over the last two years eroded trust in the ability of Greece's politicians to stick to their pledges.

European Parliament President Martin Schulz was in Athens on Tuesday for a series of meetings, and he gave a speech in Parliament stressing that "Greece must remain in the euro."

"We must do everything we can to prevent the collapse of the euro," he said, adding that more emphasis must be put on measures to promote growth rather than only on cutbacks.

"A policy based solely on austerity spells economic disaster," he told Greek deputies.

"Budgetary prudence is certainly essential (but) ... there is too much focus on financial penalties and austerity packages." Schulz said economic growth could be stifled in many European countries.

"How are countries whose economies are at a standstill, which are facing a recession, supposed to pay off their debts? Greece has already paid a high price. It cannot go on paying," he said.

On Monday, the Standard & Poor's ratings agency downgraded Greece's credit rating to "selective default" over a debt writedown deal with private creditors that is an integral part of the second bailout.

The downgrade had been widely expected, as ratings agencies had said the bond swap with private creditors, which seeks to cut euro107 billion off Greece's debt, would constitute a selective default. Once the swap is carried out next month, the agencies are expected to upgrade Greece.

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Derek Gatopoulos and AP Television in Athens contributed.