Greek unions warn against €110bn 'Mafia-style' rescue deal

Greece prepares for two days of national strikes to protest against further austerity measures

Greece's biggest union has warned that the crisis-hit country will not be able to repay its debt if the government implements fresh austerity measures that amount to a "mafia-style rescue".

Zoe Lanara, international relations secretary at the General Confederation of Greek Workers (GSEE), said: "This proposed austerity package will only make things worse. It will mean we are pushed deeper into recession and will never pay back our debts."

The GSEE, which represents more than 500,000 workers, and the public-sector union have called a 48-hour general strike on Tuesday and Wednesday to oppose the new €28bn (£25bn) , five-year programme of cuts, tax rises and privatisations.

Opposition to the measures, which are a condition of the next installment of the €110bn bailout from the EU and the IMF, came as German Chancellor Angela Merkel called for Greek unity, following two weeks of mass protests and strikes organised by New Democracy, the main opposition party.

The GSEE is angry about plans in the package to sell-off state energy, water and telecommunications utilities. The union believes that an economy that contracted by 4.5 per cent last year cannot afford to privatise its major industries.

Ms Lanara said: "These are profitmaking enterprises and to strip them from the state will further diminish our economy's ability to recover."

She also criticised the public-sector wage and pension cuts contained in the new package, including plans to lower the tax-free earning threshold from €12,000 a year to €8,000. She said: "The majority of Greek people, the honest taxpayers, are being hit hard and even pushed into poverty. They are socially unfair."

The GSEE is calling for an "aid package" for Greece. Ms Lanara said: "We need an aid plan along the lines of the Marshall Plan, after the Second World War. Our EU partners are not only our creditors but our partners too."

She added that the current bailout arrangement was "a mafia-style rescue because this rescue is just as dangerous as being left alone".

The news of this week's industrial action came as the Greek electricity workers union staged rolling power cuts throughout last week. The protest angered many Greeks, with a poll for a national newspaper finding that 80 per cent of people did not support the union's action.

The ruling Pasok party reached an agreement with its lenders at an EU summit in Brussels on Thursday that should allow the next tranche of the emergency loan, worth €12bn, to be released. This initially led to a global stock market rally, though Greece will still have to take a second bailout, expected to be about €120bn.

British Prime Minister David Cameron gained assurances last week that Britain would not be required to contribute to the new loan. This followed public lobbying from a group of Conservative MPs.

A hectic week in Europe also saw 63-year-old Italian Mario Draghi appointed as head of the European Central Bank. He will succeed Jean-Claude Trichet, who leaves in October after eight years at the helm.

The news emerged as fears grew that Mr Draghi's native country could be criticised in the next wave of European bank stress tests, due next month. Italian bank shares fell heavily as a result.

There are also concerns over British banks. On Friday, the first meeting of the Bank of England's financial policy committee concluded that an audit is needed of the banks' exposure to the eurozone's debt problems.

However, the Governor of the Bank of England, Mervyn King, moved to allay worries that UK institutions would be hurt badly by Greece's problems, saying that they had "really remarkably small" exposure to the country.