ATHENS, Greece — Greece's rescue creditors on Wednesday pressed the debt-shackled country to fire excess public servants and further scale back workers' pay rights.
The International Monetary Fund's top official in Greece warned the government it would not escape high budget deficits unless it switches efforts to spending cuts, arguing that the country's taxpayers had reached the limit.
"There are no more low-hanging fruits," Poul Thomsen told a financial conference in Athens. "We have clearly reached the limit of what can be achieved through raising taxes ... Lesson: We have to move the expenditure side."
Thomsen urged the government to "move aggressively" reduce the size of the public sector.
"We are also warning that unless there is an acceleration of reform in the public sector — the deficit will get stuck at around 10 percent," he said.
"Greece might have to accept involuntary redundancies ... and address the legacy of too high and inflexible wages," he said. "I cannot see how fiscal recovery can proceed without addressing these taboos."
The IMF and eurozone countries have been propping up Greece's economy with rescue loans since May, 2010 — imposing harsh spending-cut demands that have driven the country into recession.
Greece has admitted it will miss its deficit targets this year, with revenues still weak despite draconian tax hikes. But Prime Minister Lucas Papademos promised to speed to painful reforms if needed to meet future targets.
"Time is pressing. It is our actions and results that in the next few months will determine the country's financial and European prospects," he said. "If in practice, implementation of our policies does achieve the required fiscal results ... then, without question, the government will do what ever is necessary to achieve our commitments."
Greece is currently negotiating the terms of a second, massive rescue package, worth €130 billion ($171 billion), with eurozone partners and private bondholders.
Finance Minister Evangelos Venizelos said the terms of that agreement cannot be amended by future governments — effectively locking the country into the deal through 2015.Comment on this story
Venizelos is part of Papademos' month-old coalition government tasked with negotiating the deal ahead of a general election expected in the spring.
"Now is the hour to negotiate the new program that will shield us with €130 billion in additional assistance from our partners, that will cover our funding needs till 2015," Venizelos told the finance conference. "After the agreement is signed and ratified, a renegotiation cannot be foreseen — these are terms set with our partners to more than double financial support for Greece, and retain our position in the euro."
Venizelos said he believed talks with banks for a voluntary bond write-down could be concluded "without much difficulty."
Economic forecasters say Greece is heading toward its fourth year of recession in 2012.