AFP

ATHENS GREECE was expected on Sunday to unveil plans to trim its bulging civil service and meet one of its creditors’ key demands a day ahead of a eurozone meeting that could free up an eight-billion-euro loan.

The 17 countries that share the debt-challenged euro currency will meet in Luxembourg on Monday in an effort to reach an agreement on releasing the bailout tranche which has been blocked by the IMF for the past month.

Divided eurozone ministers will seek to avert a Greek default, which could send stock markets into a panic, deal an unprecedented blow to the European currency and bring the world back to the brink of a fresh financial crisis.

On Sunday afternoon, Greek Prime Minister George Papandreou was to chair an emergency cabinet meeting to finalise the details of a scheme aimed at shrinking the public sector.

Following consultations with EU and IMF auditors, the government now seems to have locked on a scheme to place 30,000 civil servants temporarily in a “labour reserve”.

Finance Minister Evangelos Venizelos said the government had developed the scheme effectively laying off state workers with “transparent and objective” criteria.

“It creates the lowest possible social cost and places on a ‘reserve’ those who in comparison can more likely cope with the difficulties of this new situation,” Venizelos said in an interview with the Sunday edition of newspaper To Vima.

Greek civil servants’ jobs are protected by the constitution, hence the controversial idea of a “labour reserve” — where those close to retirement could be placed on a lower wage.

Antonis Samaras, the leader of Greece’s main opposition New Democracy party, complained however that the government had rejected a more efficient labour reserve plan.

“With our proposal the deficit will be reduced by 850 million (euros) the first year and four billion the fifth.

According to the government’s proposal the deficit will decrease by 614 million the first year and three billion the fifth,” he wrote in the same newspaper.

EU-IMF auditors returned to Athens on Thursday, four weeks after they abruptly left, having noticed new spending discrepancies by the Greek government and disappointed at the lack of progress in implementing promised structural reform measures.