Athens News Agency: Daily News Bulletin in English, 98-03-16

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From: The Greek Press & Information Office, Ottawa Canada <grnewsca@sympatico.ca>

CONTENTS

[01] Greece joins ERM after drachma devaluation, drastic measures announced

[02] ... Ambitious economic measures announced

[03] ... Cabinet meeting

[04] ... Opposition parties' reactions

[05] Greece satisfied with EU decision on Cyprus

[06] Papantoniou announces drastic economic measures

[07] ... Reactions

[08] ... Outgoing GSEE president

[09] ... Coalition says 'no' to Amsterdam Treaty

[10] Prime minister calls on the nation

[11] ... Karamanlis reply

[12] Simitis on official visit to Prague

[13] Greek-German talks on Cyprus issue

[14] GSEE elects new administration

[15] ND leader in good condition

[01] Greece joins ERM after drachma devaluation,drastic measures announced

Athens 16/03/1998 (ANA)

The move and accompanying economic measures were lauded by the European Union and the International Monetary Fund alike, but met with strong criticism from the Greek opposition parties and labour unions.

The Greek government on Friday announced it had applied to immediately join the up to then 12-member ERM, following a day of speculation in which the drachma fell sharply against the ECU.

The EU's monetary committee comprising senior bank and finance ministry officials, during a seven-hour meeting in Brussels on Saturday, accepted the drachma into the ERM, effective immediately, and also approved an Irish request for a 3 percent revaluat ion of the punt to put it back in line with economic fundamentals.

The EU monetary committee set a central rate of 357 drachmas to the European Currency Unit (ECU) for the Greek currency's debut today on the ERM, the grid the 15-nation bloc uses to ensure currency stability and a precursor to the single currency which Greece hopes to join in 2001.

Prime Minister Costas Simitis said in a televised address to the nation Saturday night that the drachma devaluation and ERM entry were necessary for Greece's membership in EU economic and monetary union (EMU), adding that he wanted Greece to enter the euro-zone in 2001 at the rate chosen earlier that day.

In Brussels, European Commission President Jacques Santer welcomed the move saying that, combined with "ambitious" measures on public finances, privatisation and labour market reforms,it would "contribute to the credibility of Greek economic policy".

The EU monetary committee anticipated that the privatisation proposals outlined over the weekend would yield 0.8-0.9 percent of Gross Domestic Product per year on average.

It said the incorporation of the drachma in the ERM reflects the substantial economic progress Greece made over the past few years and the commitment of the Greek authorities to the convergence process.

In Washington, International Monetary Fund (IMF) managing director Michel Camdessus yesterday welcomed Greece's decision to join the ERM and the European Monetary System (EMS).

"The drachma's new central exchange rate, and the supportive package announced by the government, should provide a sustainable basis for the government's commitment to join EMU as from 2001," Mr. Camdessus said in a statement.

"I am encouraged by the (Greek) authorities' determination to support the drachma's ERM entry through fiscal adjustments intended to realise the Convergence Plan's targets, a forward-looking wages policy, measures to enhance the efficiency of the labour market and a strengthened structural reform effort," he added.

Following Greece's entry, Sweden and Britain remain the only two of the 15 EU member states outside the ERM.

[02] ... Ambitious economic measures announced

The package, feared likely to spark considerable social unrest, provides for the partial privatisation of 11 public utilities and three or four state-controlled banks in 1998,1999 and 2000,with the state retaining at least 51 per cent controlling inte rest.

It also envisages the streamlining of other loss-making utilities, such as the national carrier Olympic Airways,railways,urban transport and the post-office.

Mr. Papantoniou said he would shortly be tabling a draft bill on changes in the social security system,and announced measures for trimming public deficits,as well as changes in labour market regulations affecting both the private and public sectors.

The fiscal adjustment measures aim at reducing public sector deficits to 2.4 and 2.1 per cent of GDP in 1998 and 1999 respectively, Mr. Papantoniou said.

He stressed that the target of further bringing down inflation to 2.5 per cent by the year's end still stands,and urged employers and unions to adopt the figure as a guideline in negotiations for collective labour agreements.

Finally, he expressed confidence that there would be no further speculative pressures on the drachma,as the currency's new parities were considered fully competitive.

[03] ... Cabinet meeting

Optimism over the successful entry of the drachma into the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) was expressed by government sources at the end of the Cabinet meeting.

The same sources said that the negotiations for the ERM entry had commenced two months ago, but "utmost secrecy" had been necessary to avoid unwanted pressures on the Greek currency.

The recent US$1 billion loan raised by Greece had been planned independently of ERM entry and was not connected to that decision, the sources added.

The sources also dismissed rumours of early elections as "ludicrous".

The premier left Sunday afternoon as scheduled for an official three-day visit to Prague.

[04] ... Opposition parties' reactions

ND Parliamentary Group General Secretary Stavros Dimas said "Mr. (Costas) Simitis will go down in history as the prime minister of taxes and devaluations."

ND Parliamentary Group spokesman Dimitris Sioufas said that the Greek people were called on to pay for the failed economic policies of the Simitis government.

Former ND leader Miltiadis Evert questioned the reasons for the recent US$1 billion loan by the government for the fiscal defence of the drachma, which, he said, would cost the Greek people US$100 million.

The Communist Party of Greece (KKE) on Saturday described the government's decision for ERM entry as "an extremely negative development of long duration".

The victims of the government's policy would be the working class and less well-off segments of the population, while those controlling large amounts of domestic and foreign capital would benefit, along with the big hoteliers and major exporters, it sai d.

A party announcement said the government would use devaluation "as a tool for launching a fresh offensive on workers' rights, the social security system and public utilities", and called on the Greek people to "clash with the monopolies and their govern ments".

Coalition of the Left and Progress leader Nikos Constantopoulos accused the government of making a sudden about-face, after steadily supporting the 'hard drachma' policy.

Addressing the party's central committee on Saturday, he charged that "certain people who had been informed of the impending devaluation took the opportunity to profiteer from a position of safety, at the expense of the national currency".

According to Mr. Constantopoulos, the change in the foreign exchange policy was "tantamount to acknowledging that the course followed to date was a wrong one".

In a related development, the General Confederation of Workers of Greece (GSEE) representatives, meeting at Kavala for the organisation's 29th conference, called on the government to protect workers from the repercussions of the drachma's devaluation.

GSEE President Christos Polyzogopoulos asked for "immediate measures so that the end result (of the devaluation) will be positive."

[05] Greece satisfied with EU decision on Cyprus

EDINBURGH 16/03/1998 (ANA - M.Spinthourakis)

The "15" reached a compromise decision based on the British presidency's proposal on accession negotiations with Cyprus, with France withdrawing its initial objections.

According to the decision, accession negotiations between the EU and Cyprus will start on March 31 as scheduled,irrespective of Turkish Cypriot participation. Accession talks with central and eastern European countries wiil also begin on March 31.

"The participation of Cyprus in the EU does not depend on a solution to the Cyprus issue," Mr. Pangalos said shortly after the end of the Council.

Both the British presidency and the representatives of most countries stressed that Cyprus must not be punished because the Turkish Cypriot side refuses to participate in the accession negotiations.

Mr. Pangalos said that, after certain changes made by the British presidency in its proposal on Cyprus during the meeting, the Greek side accepted the proposal, withdrawing its own, while only France insisted on clear reference to the issue of the Turkish Cypriots' participation for accession negotiations with Cyprus to start.

According to diplomatic sources, the British side accepted the Greek proposal to withdraw a reference from its proposal which considered that the EU's target is the accession of a bizonal, bicommunal Cyprus. According to the sources, the word accession was removed from the relevant paragraph, which satisfied Greek diplomats who supported the British presidency's proposal together with all the member-states, with the exception of France.

Speaking to reporters, Mr. Pangalos said that in his address to the Council, he made it clear to his counterparts that decisions on the start to accession negotiations with Cyprus have been ratified at the highest political level, namely the Luxembourg summit,and that an overturning of these decisions is attempted then there will be an overall political crisis on the issue of EU enlargement.

Mr. Pangalos said that he also underlined that it is not possible for Cyprus to become a hostage of Turkey, reminding that President Clerides made a bold and generous proposal to the Turkish Cypriots who, however, do not appear prepared to accept.

However, he added that the door to the participation of the Turkish Cypriots in the delegation of Cyprus which will conduct accession negotiations remains open.

Early in the afternoon, and while it had been made clear that the French side was isolated in the Council, after a telephone conversation was held between French Foreign Minister Hubert Vedrine and French President Jacques Chirac, France accepted the presidency's proposal.

Consequently, the "15" reached an agreement which satisfies the Greek side since it disengages accession negotiations from a solution to the Cyprus issue. This was also made clear by statements made by most EU Foreign Ministers.

According to Saturday's decision, accession negotiations will start on March 31 and then there will be a monitoring process both for Cyprus and central and eastern European countries. In the framework of the process, the European Commission will submit reports on each country to the Council of Ministers which will also have the political responsibility of assessing the course of each country towards accession to the EU.

British Foreign Secretary and EU President Robin Cook told reporters that Cyprus President Glafcos Clerides' proposal to the Turkish Cypriot side to participate in the island republic's accession talks was "generous and realistic", adding that Cyprus sh ould not be punished if the Turkish Cypriot side refuses to participate in accession talks.

[06] Papantoniou announces drastic economic measures

Athens 16/03/1998 (ANA)

National Economy and Finance Minister Yiannos Papantoniou said that all the measures would be implemented within the next 18 months, rather than the customary three-year horizon.

The drachma's new parity vis-a-vis the European currency unit (ECU) was set in Brussels on Saturday at 357 drachmas -- denoting a 14 percent devaluation -- after negotiations between the Greek government and the EU's monetary committee, and is the parity with which the Greek currency will enter the EURO zone as of January 1, 2001.

Mr. Papantoniou announced a series of measures to support the new exchange policy, including:

- Containment of subsidies to private and public enterprises, entailing savings of 100 billion dr. for the state coffers.

- Reduction of the Public Investments Programme deficit by 100 billion dr. or more, through increased participation of the private sector in the construction of public sector projects with private capital and other self-financing schemes.

- Reduction of the social security deficit by 100 billion dr. in 1998 and 250 billion dr. in the next two years through limiting wasteful spending.

- Arrangement of labour time on an annual basis to provide flexibility in the use of manpower, possibly through implementation of flexible work-hours and other methods.

- The introduction of part-time work in the public sector.

- Reinforcing the institution of collective labour negotiations at local and business level.

- Revision of the rules governing personnel relations in public sector enterprises aiming at increasing productivity.

- Gradual privatisation of 11 public sector enterprises and three to four state-controlled banks between 1998-2000. The measure affects the Bank of Crete, the Macedonia-Thrace Bank, and the Bank of Central Greece, and possibly the Ionian Bank as well.

- Limiting evasion of contributions in the social security sector, legalisation of illegal foreign workers entailing social security contributions, the merger of supernumerary auxiliary social security funds, and limitation of administrative and medical expenditures.

- Limiting the employment of pensioners.

- Partial liberalisation of the disposable monies of social security funds with surpluses, to be managed by their administrations.

- Restructuring of the entire social security system with changes in the retirement age and in the pensions-to-revenues ratio, to make the sector more socially just.

- Streamlining of the loss-making public sector enterprises - Olympic Airways, OSE railways company, ELTA postal office, public transportation - through the appointment of high-standard administrations, revision of the personnel regulations, transfers of supernumerary personnel, and through strategic alliances with domestic and foreign companies.

Mr. Papantoniou said the above measures did not mean a change of direction, but rather acceleration in the materialisation of the programme for the structural adaptation and development of the economy.

He said that this year up to 49 percent of the three banks, the public petroleum corporation DEP, the EYDAP Athens water/sewerage company, the KED public sector property company, the Thessaloniki International Fair, Olympic Catering, Olympic Tourism, an d the Corinth Canal Management Company, while the third package of shares of the Hellenic Telecommunications Organisation (OTE) would be floated on the Athens Stock Exchange.

Next year, the Thessaloniki water company, the Race Track Organisation, and the Piraeus and Thessaloniki port authorities would be partially privatised.

Mr. Papantoniou said that the incomes policy providing for 2.5 percent salary increases and the hiring policy providing for the appointment of one civil servant for every five departing state employees would be strictly implemented, while medical expenses would be limited and tax policy measures would be applied to increase revenues and combat tax evasion.

He said there would be no freeze on salaries or pensions, nor would any extraordinary contributions or other taxes be imposed this year.

Replying to accusations that the impending drachma devaluation and ERM entry had been leaked abroad, Mr. Papantoniou said that the negotiations were known on Friday to more than 230 EU officials outside of Greece.

He assured that the drachma parity would remain steady at its new rate, given that the European central banks would intervene to back the Greek currency in the event it faced pressures.

The minister anticipated minimal, short-term repercussions on inflation in the next few months, estimating that inflation would end the year at 2.5 percent, provided the social partners (businesses and employees) reacted in a positive and coolheaded spirit.

He called on industrialists, craftsmen, hoteliers and other businessmen to help spread the benefits anticipated from the drachma's entry into the EU's exchange rate mechanism.

"If there is no social reaction and the inflation target is not upset, there will be no burden on incomes," Mr. Papantoniou said, adding that "it is the responsibility of all of us to see that the government's anti-inflationary policy is not disrupted".

He said Greece would not draft a new Convergence Programme, but would simply update the present one to adapt it to the new state of affairs, as all the member-states do every six months.

"What we shall do now, we will do again six months from now, just as we did six months ago," he said.

Mr. Papantoniou further said that the representatives of the business sector had persistently been asking for a drachma devaluation, arguing that the previous parity was not competitive for Greek products.

He said entry in the ERM was made possible today due to the hard drachma policy followed up to now, which had improved the indicators of the Greek economy and de-escalated inflation.

He further said that there would be no repercussions on disposable income provided the inflation target was attained.

But, he warned, "if calm does not prevail, we will shoulder unpleasant burdens and we will all lose in the event that inflation gets out of control".

Mr. Papantoniou said the Greek government had been advised of the approval for the drachma to join ERM since Thursday, noting he had first sought ERM entry two months ago but had received a negative response on the reasoning that inflation needed to be below 3 percent, as was the case with Italy.

The minister also predicted that the change in the drachma parity would influence a decline in interest rates, although it was not possible to determine when de-escalation would start.

"What is certain," he said, "is that there will be a clear downward trend".

[07] ... Reactions

Mr. Dimas said that certain measures announced by Mr. Papantoniou have also been announced in the past and have not been applied by the government, such as restrictions in hirings, cracking down on tax evasion, strict conditions for providing state guar antees and the privatisation of three banks.

Mr. Dimas noted that even the simple repetition of these measures means that the government confesses to its failure.

Former ND leader Miltiades Evert said that statements by Prime Minister Costas Simitis and Mr. Papantoniou cause indignation and anger and added that "they did not dare to utter the word devaluation, which until the day before yesterday they considered a criminal policy. Not only did they not ask the people for pardon, but they also provoke their intelligence with their statements."

Mr. Evert said that nothing new and substantive was announced, stressing that the drachma "will continue to fluctuate with a plus or minus 15 per cent."

The Communist Party of Greece (KKE) launched its own attack, saying that the measures announced by the government "will speed up the impoverishment of working people and will eliminate even the remnants of their elementary rights. The new measures stren gthen the dictatorship of the multinationals."

KKE's announcement spoke of "unprece-dented authoritarianism" in relation to the government's practices which it criticised of trying "to terrorise working people and take by surprise all who had not realised in time what kind of a policy we were up against."

KKE appealed to working people and called on them to resist the storm against them and to proceed with the creation of a "social and political front by the working class and the poor strata of farmers and the city to demolish this policy."

Referring to the same issue, Democratic Social Movement (DHKKI) President Dimitris Tsovolas stressed that the measures announced by Mr. Papantoniou constitute in practice a new serious attack on the income of salaried people, pensioners and the wide pop ular strata in general, as well as an additional blow to small and average-size enterprises and to the Greek economy in its entirety.

[08] ... Outgoing GSEE president

On the question of Mr. Papantoniou's directive for 2.5 per cent salary increases in the private sector, Mr. Polyzogopoulos said that GSEE will do its duty and will mobilise working people if negotiations on collective agreements show that their income is not safeguarded.

Referring to privatisations, Mr. Polyzogopoulos expressed the complete opposition of PASKE trade unionists to the widening of the privatisations percentage to 49 per cent. He warned that the strong trade unions in public utilities (DEKO) will do their duty.

Mr. Polyzogopoulos said that revenues from whatever partial floatations must be included in the operational restructuring plans for DEKOs and not be used to support deficits.

Commenting on the insurance issue, Mr. Polyzogopoulos perceived a threat for the future regarding the age limits for pensioning and stressed that GSEE will join the dialogue expected to start at the end of 1998 but in no way will it accept restrictions to the social rights of working people and pensioners.

[09] ... Coalition says 'no' to Amsterdam Treaty

Consequently, the Coalition's conference will be held on April 4-5 and will be called on to take the final decision on the party's position on the vote to be held in Parliament when the Amsterdam Treaty is raised for ratification.

During the vote held yesterday afternoon, which concluded the Central Committee's two-day discussion, 50 members of the body voted "no" plus 6 who sent letters, meaning a total of 56, against 40 who stated "present", plus 2 who sent letters, meaning a total of 42.

All who sent letters participated in the conference of the General Confederation of Workers of Greece, GSEE, held in Kavala. A total of 32 members of the Central Committee voted in favour of the position of a "critical yes."

Summing up the conference shortly before the vote was held, Mr. Constantopoulos said that what is not questioned in any case is the European orientation of the Coalition and, in this context, he expressed the view that there is no absolute "yes" or an a bsolute "no".

[10] Prime minister calls on the nation

Athens 16/03/1998 (ANA)

"What I request is for you to have confidence in the course of the country, as the EU member-states have," he said.

"As of today, the drachma is participating in the European Union's Exchange Rate Mechanism. Its participation was an essential and crucial precondition for the conclusion of our economy's positive course. It is a step in the framework of the wider strat egy we are following for the final achievement of our economic and political target, our participation in Economic and Monetary Union. For our equal presence in the EU," the premier said.

"The participation of the drachma took place at our own initiative, it took place according to a plan and regarding the specific time it is taking place and it is taking place after a delicate and tough negotiation with our European partners lasting many weeks.

"What will we gain' First of all, increased international confidence, recognition of the accession prospect of the country in the final phase of EMU. Support for the economy and our currency at a time of strong speculative moves. These benefits are part icularly important and crucial for the success of our entire effort to improve the standard of living of all the Greeks.

"Accession to the Exchange Rate Mechanism could not take place earlier. The data concerning our economy and inflation in particular did not allow this. The performances of the economy at present render the stable participation of the country in this mec hanism feasible. The hard drachma policy was that which secured for us the possibility of today's undertaking. There is no change in orientation. The adjustment of the value of the drachma against the other currencies by 14 per cent is combined with our a ccession to the Exchange Rate Mechanism. The adjustment of a currency with the purpose of its accession to the Exchange Rate Mechanism is customary to maintain its stability afterwards. To rule out other adjustments after accession.

"From now on, Greece will proceed with this new parity and will join the EMU in 2001 with it. This adjustment will have positive results for development," Mr. Simitis said.

"I wish to stress that in past years other European countries were also obliged to proceed with adjustments in their currencies' parities, despite the fact that their inflation was much lower. I refer to Italy, Spain and Sweden as an example. What is ne cessary for there to be positive results which we are looking forward to is to have options which will utilise and will not retract benefits resulting from today's move. We must not distance ourselves from our strategic targets. We are faced with the nece ssity to decrease inflation from about 4.3 per cent at present to 2 per cent at the end of 1999. If we achieve this we will stabilise the economy even more and we will strengthen development. It is the necessary ticket to final success. We must all contri bute to this without exception.

"Today's development is an indication of a step forward. Our accession to the Exchange Rate Mechanism expresses the confidence of our European partners and the prospects of the economy," Mr. Simitis added.

[11] ... Karamanlis reply

He further said that the present devaluation of the drachma was a risky option which would mean a "high cost of living and poverty".

"The devaluation has been imposed on the government due to its own failure," Mr. Karamanlis said, adding that "the government's lies are all over and bold structural changes are required".

[12] Simitis on official visit to Prague

PRAGUE 16/03/1998 (ANA)

Mr. Simitis will meet his Czech counterpart Josef Tosovsky today and President Vaclav Havel tomorrow.

Mr. Simitis is accompanied by Alternate Foreign Minister George Papandreou and other senior government officials.

His talks are expected to focus on the Czech Republic's European Union accession course. The central European country, together with another five countries, is due to start accession talks with the Union on March 31.

Bilateral talks, as well as the Czech Republic's request for joining NATO, will also be discussed.

[13] Greek-German talks on Cyprus issue

BONN 16/03/1998 (ANA - P. Stangos)

[14] GSEE elects new administration

Athens 16/03/1998 (ANA)

The outgoing GSEE President and PASKE Secretary Christos Polyzogopoulos said working people, with their votes at the conference, are sending their own message of unity and determination on tackling the situation being created with the measures announced by the government.

He said the delegates acclaimed the confederation's policy to date with their vote. Mr. Polyzogopoulos said the widest possible alliances and cooperations will be sought.

[15] ND leader in good condition

Athens 16/03/1998 (ANA)

Mr. Karamanlis, who made no statement, will stay at home for three or four days, according to doctors, and over the next six weeks he will be needing crutches to walk.

His doctor, Mr. V. Bitounis said he will be subjected to physiotherapy over this period and his wound will be completely healed after a period of two months.

Mr. Karamanlis had ruptured a tendon while playing soccer with Parliament deputies last Wednesday.

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