Greece holds crisis talks as pension reform

Greek President Carolos Papoulias called crisis talks with the country's main political parties today as the government prepared to unveil a pension reform that is set to unleash a storm of protest.

The talks are being boycotted by the leaders of the Communists and the leftist Syriza party, who have helped mount massive protests in recent weeks against the government's austerity plans and its international bailout.

Papoulias last week warned that Greece stood on the "edge of the abyss" after violent clashes broke out durring a general strike against the government's plans, killing three people in a bank that was firebombed.

The unrest in Greece has helped trigger a massive loss of confidence in financial markets, with investors fearful that Greece's fiscal problems could spread to other weakened economies in the eurozone like Portugal and Spain.

Following days of Greece-linked mayhem on world financial markets last week, US President Barack Obama also held separate phone talks with French President Nicolas Sarkozy and German Chancellor Angela Merkel on the crisis.

EU finance ministers meeting in Brussels overnight considered setting up a crisis fund that could touch 750 billion euros to help out eurozone members in distress in a bid to prop up the euro currency.

But in Greece there is widespread anger despite a 110-billion-euro bailout from the European Union and the International Monetary Fund to help Greece stay solvent, with many concerned at the extent of the cuts demanded by the lenders.

The government today is set to give its approval to a plan to overhaul the pensions system, raising the retirement age for women to 65 and increasing the number of years that workers have to pay retirement contributions.

The reform comes on top of cuts agreed earlier that will eliminate 13th and 14th month pension bonuses that had previously been given to retirees.

"My parents are going to lose 10,000 euros a year," because of the abolishment of their pension bonuses, said Iasonas, a physics student and activist whose parents are former university lecturers.

"They feel like they've worked all their lives for nothing," he said.

In an interview with To Vima daily issued yesterday, Greek Finance Minister George Papaconstantinou warned of the catastrophic consequences if Greece were to default on its debts -- something the government is racing to avoid.

"The banking system would stop operating and businesses and households would automatically lose access to bank funds," Papaconstantinou said, adding "We would enter an even deeper recession of around 10 per cent, maybe more, which we would not exit for years," he added.