Greece breached bailout rules with staff hirings: report

(ATHENS) - Greece breached the rules of its EU-IMF loan agreement by taking on some 70,000 public sector staff in two years, undermining efforts to reduce the state payroll, a report said on Sunday.

To Vima weekly said the hirings in 2010 and 2011 were highest in local administration, health, the police and culture, where the number of employees actually increased.

It cited a report from a permanent mission to Athens of the so-called 'troika' of international creditors, the EU, IMF and the European Central Bank, and data given by outgoing finance minister George Zannias.

An unidentified troika official told the daily: "While they legislated rules to reduce the number of civil servants, they were bringing people in through the window."

The official added that over 12,000 people were hired by local councils even as a cost-cutting initiative merging municipalities was underway.

Zannias' report to the new government coalition after June 17 elections allegedly reveals that although over 53,000 civil servants retired in 2010, the overall number of state staff was almost steady at 692,000 people, To Vima said.

In this case, most of the vacancies were filled immediately, the daily said.

Similarly, although another 40,000 staff left in 2011, the net reduction on the payroll was only 24,000.

By this time, Greece had promised to only hire one civil servant for every five that left.

But over 16,000 people were hired instead of the allowed 8,000, To Vima said.

The report came ahead of an expected EU-IMF audit starting on Monday.

Structural reforms pledged in return for billions of euros in EU-IMF loans were suspended in April as the country held two elections in six weeks, with the first on May 6 failing to produce a workable government.

The new government, built around the conservatives and backed by socialists and moderate leftists, on Saturday said it wanted to freeze further civil service layoffs and bargain for a two-year extension to its tough fiscal adjustment.

The aim would be to meet fiscal goals "without further cuts to salaries, pensions and public investment" and new taxes, a government policy plan said.

There have been indications that a target extension can be considered, but eurozone hardliners such as Germany and Austria are unlikely to accept a watering-down of Greek commitments without a fight.