Military in firing line as Greece cuts back

• Prime Minister George Papandreou is currently in talks with trade unions to try to avoid strike action over the huge spending cuts the country faces. Picture: Getty

Defence minister Evangelos Venizelos yesterday said that Greece aimed to slash operating costs by up to 25 per cent in 2010 from 2009, instead of the planned reduction of 12.6 per cent listed in this year's budget.

"That is a colossal amount, reaching the margin of our operating needs," Mr Venizelos said.

However, he insisted that the cuts were not a direct result of the Greek debt crisis, nor would they affect the strategic balance with historic rival Turkey, whose prime minister, Recep Tayyip Erdogan, is to visit Athens next month. Greece remains at odds with neighbour and Nato ally Turkey over the divided island of Cyprus and boundaries in the Aegean Sea but has improved ties over the past decade.

Mr 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.

The minister added that the reduction would not affect arms orders and implied that Greece's Nato allies remained keen to sell weapons to his government.

"Countries that produce weapons programmes 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.

Mr Venizelos said Greece would spend about 6 billion – or 4.8 per cent of GDP – on defence, with about 2.3bn going on 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 the International Monetary Fund for a rescue package worth 45 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.

Yesterday, EU monetary affairs commissioner Olli Rehn said he was "confident talks will be concluded in the next days".

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.

But Greek unions, angry at the prospect of more austerity measures are planning a general strike on Wednesday 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.

However, a source in a meeting between Prime Minister George Papandreou and labour union leaders yesterday said Athens was 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 aim for a reduction in the deficit of ten percentage points by the end of 2011.

"We got a flavour of a very harsh package of measures," said Yiannis Panagopoulos, head of the powerful GSEE umbrella trade union. "Measures that will lead to recession."