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'Greece will tame debt with reforms'

world Updated: Jun 27, 2010 15:59 IST

AFP
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Greece will overcome its huge debt crisis with its austerity plan, an IMF official said on Sunday as a poll showed a majority of Greeks fear that unpopular pension reforms will be in vain.

Poul Thomsen, the head of the International Monetary Fund mission dealing with Greece, told To Vima daily that Athens is making progress on its "ambitious" programme of cuts.

The cutbacks have caused labour turmoil and a series of protests across Greece, with a new general strike, the fifth since February, due to be held on Tuesday.

"Such an adjustment is not easy and often causes discontent," Thomsen said. "This is understandable as people see things getting worse before they improve."

But he added: "The effort has begun vigorously and I firmly believe that Greece will succeed."

Thomsen also applauded the Greek government's decision not to restructure its debt as this "which would entail a huge cost."

After decades of unrestrained state spending, Greece faced bankruptcy this year with a national debt of nearly 300 billion euros (371 billion dollars).

It was rescued by a bailout loan from the European Union and the IMF for which it had to pledge a spate of deep spending cuts.

Among the measures is an overhaul of the pensions system which has eaten up vast amounts of state funds.

The government this week finalised reforms which progressively raise by 2015 the age of retirement for both men and women to 65 years for a full pension, equating the sexes for
the first time.

It also increases the mandatory workforce period from 37 years to 40 years.

The new system will see an average reduction in pensions of seven percent and bonus retirement dues which pensioners used to receive for Christmas, Easter and summer vacations will be slashed.

Parliament is expected to begin debate on the reforms next week.

A poll in Proto Thema daily on Sunday showed that 64.8 percent of Greeks believe their sacrifices will not save the crumbling pensions system, which currently consumes 12 percent of national output.

The Alco poll also found that 51.1 percent of 800 respondents believe Prime Minister George Papandreou is "too submissive" towards Brussels.