BUSINESS
10/10/2011 05:51 EDT | Updated 12/10/2011 05:12 EST

Greece activates rescue fund for Proton Bank, leaving it fully owned by fund, restructured

ATHENS, Greece - Greek Finance Minister Evangelos Venizelos said Monday night that parliament must approve a new package of economic austerity measures before the country receives its next €8 billion ($10.9 billion) rescue loan installment.

Venizelos said a key review by international debt inspectors was essentially concluded earlier in the day, with remaining "technical details" to be wrapped up Tuesday.

The new round of cuts includes plans to further reduce public sector salaries and suspend 30,000 public servants on lower pay this year — reforms that have heightened dissent in the governing Socialist party and triggered a new round of strikes.

Pensions also face fresh pay cuts, while income tax will be raised across-the-board, despite repeated previous government pledges it would avoid more blanket austerity measures.

"It is a condition that parliament approves measures that will undoubtedly be very tough," Venizelos told private Mega television.

He called the new measures harsh but necessary to avoid a chaotic default.

"It is better to go back to the level of 2005 and 2004 rather than to go back to the state we were in 1960," Venizelos said.

EU leaders have delayed a summit for several days until Oct. 23 to conclude talks on Greek aid and Europe's wider debt crisis.

Venizelos said eurozone representatives could meet just before then to approve the next Greek loan tranche, with separate approval from the International Monetary Fund coming several days later.

Athens has said it has enough funds through mid-November.

Greek Prime Minister George Papandreou spoke with EU President Herman Van Rompuy by phone Monday and will meet him in Brussels on Thursday.

Papandreou will also meet in Athens with U.S. Vice-President Joe Biden in Athens on Dec. 5, his office announced late Monday.

Greece has been struggling to emerge from a vicious financial crisis that has left it dependent on rescue loans from other eurozone countries and the IMF since May 2010. The funds are disbursed quarterly after international debt inspectors review the government's reforms and whether it is sticking to the pledges it made to receive the bailout.

Responding to the latest cuts, public transport workers walked off the job in Athens Monday, snarling traffic across the capital, while municipal workers have also been on strike, leaving garbage uncollected on many streets.

Air traffic controllers have been staging work-to-rule protests, leading to long delays for flights from Athens' international airport. A nationwide general strike is set for Oct. 19.

Separately, Greece activated a rescue fund set up under its bailout agreement to restructure Proton Bank, the finance ministry and central bank said, essentially nationalizing the lender.

Proton is one of the country's smaller banks, with assets of about €3.5 billion ($4.7 billion).

Worries about the banking sector pushed the main Athens stock index down 0.58 per cent at 740.06, continuing a decline after suffering heavy losses throughout the year.