By DEREK GATOPOULOS | Published: 04/29/10 at 10:47 AM
ATHENS, Greece (AP) — Greece’s defense minister on Thursday promised “colossal” cuts in military operating costs to help the debt-ridden country emerge from its financial crisis and speed up plans to modernize the armed forces.
Defense Minister Evangelos Venizelos announced that Greece is aiming to slash operating costs by up to 25 percent in 2010 from 2009, instead of the planned reduction of 12.6 percent listed in this year’s budget.
“That is a colossal amount, reaching the margin of our operating needs,” Venizelos said, insisting that the cuts were not a direct result of the Greek debt crisis, nor would affect the strategic balance with historic rival Turkey. Turkish Prime Minister Recep Tayyip Erdogan is to visit Athens next month.
Greece remains at odds with neighbor and NATO ally Turkey over the divided island of Cyprus and boundaries in the Aegean Sea but has improved ties over the past decade.
Venizelos did not give details of how the cuts would be achieved, saying only that results of a major armed forces review would be outlined in “several weeks”.
“We are reducing operating costs … We are not doing this because of economic pressure, we are doing this because this is mandated by the modern views of military planning,” he said.
“Countries that produce weapons programs are allies and friends, countries that are now called upon to help us with the fiscal crisis. So we do raise this issue,” he said.
Venizelos said Greece will spend about €6 billion — or 4.8 percent of GDP — on defense, with about €2.3 billion going an arms spending as measured by EU accounting rules and the rest used for paying personnel and operating costs.
Athens is currently in talks with the European Union and IMF for a rescue package worth €45 billion ($60 billion) this year, and more for the following two years, to cope with its acute financing crisis that has brought it to the brink of default.
The prospect of a deal eased massive pressure on Greece in the bond markets and saw shares on the Athens Stock Exchange rebound strongly after days of heavy losses.
The bourse’s General Index shot up to close 7.14 percent higher at 1,829.29 points, while the spread on Greek 10-year bonds dipped to 6.48 percentage points over their benchmark German equivalent, from 10 points Wednesday.
But unions, angry at the prospect of more austerity measures are planning a general strike on May 5 as part of a renewed protest campaign.
Officials have been reluctant to say what measures are being discussed before the bailout talks are concluded.
“It is certain that all these measures and decisions are painful,” said government spokesman Giorgos Petalotis, who promised that the measures would be “socially just.”
“Today, the challenges we face are very large,” he said.
But a source in a meeting between Prime Minister George Papandreou and labor union leaders Thursday said Athens is being asked to abolish the 13th and 14th salaries — known as holiday bonuses — in the public sector. Greeks have their annual salaries divided into 14 instead of 12 monthly installments.
The source said the extra measures being asked of Greece aim for a reduction in the deficit of 10 percentage points by the end of 2011.
“We got a flavor of a very harsh package of measures,” said Yiannis Panagopoulos, head of the powerful GSEE umbrella trade union. “Measures that will lead to recession.”
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Associated Press writer Nicholas Paphitis in Athens contributed.
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