Greece pledges to overhaul loss-making state rail

The Greek government pledged Friday to radically overhaul loss-making state rail company OSE, as official data showed efforts to cut the country's bloated budget deficit remained on track, if slightly asthmatic.
Prime Minister George Papandreou said OSE was a major liability, bleeding cash and offering substandard service.
The company loses up to (EURO)1 billion a year, and has run up (EURO)10 billion in debts.
"For years (the state railways) operated as an organization that unfortunately multiplied the country's deficits, while providing a very poor quality of services," Papandreou told a cabinet meeting in Thessaloniki.
"This is going to change so that the (deficit) ... will stop and for Greece to get high-quality and reliable transport services."
Papandreou did not immediately provide details, although the government has said the company needs to shed some 2,500 jobs. He said the cabinet meeting _ the first since a reshuffle on Tuesday _ would also discuss action to promote investment and cut court backlogs.
The prime minister will deliver a keynote speech on the economy Saturday, at the opening of an annual trade fair in this northern port city.
Greece is in the midst of a deepening recession, while laboring to rein in a runaway budget deficit and public debt that brought the country to the brink of bankruptcy in May. That was avoided through emergency loans from the European Union and the International Monetary Fund.
In return for the loans, Papandreou's center-left government slashed spending, cut pensions and salaries, and hiked consumer taxes, aiming to cut the deficit from 13.6 percent of annual output in 2009 to 8.1 percent this year.
Official data Friday showed Athens remains on track to meet that target, although the rate at which the deficit is narrowing slowed slightly over the summer.
According to preliminary data issued by the finance ministry, the budget deficit from January to August slowed to 32.2 percent compared to last year, from the 39.7 percent reduction in the January-July period and 45.4 percent in the first six months of the year.
However, the overall performance is better than the 26.5 percent budget deficit reduction target laid out in the EU-IMF program for the first eight months of the year, and the country is still on target to produce an overall budget deficit cut of 39.5 percent for the year.
The ministry attributed the slowdown to accumulation of interest payments in July and August _ which make up 40 percent of yearly interest payments _ and a lag in revenues.
Although covered by a better-than-expected performance in spending cuts, the severe lag in revenue has caused concern and the government has been examining ways to boost income, including broadening an increase in sales tax.
The austerity measures have led to a backlash from labor unions, who have announced a series of demonstrations over the weekend in Thessaloniki. Past protests have turned violent, and some 4,500 police have been deployed to keep the peace _ although a police union is planning a protest of its own later Friday against pay and funding cuts.
Minor scuffles broke out between riot police and protesting firefighters near the venue of the Cabinet meeting Friday, while railway workers and left-wing unionists also held demonstrations.
Railway unions held strikes this week and are threatening more walkouts if the government goes ahead with plans to cut jobs and partially privatize the railway operator.
Transport Minister Dimitris Reppas has said OSE payroll costs have risen 62 percent over the past six years _ despite a drop in the work force. However, he insisted that most of the personnel cuts could be effected through retirement over the next three years, while some 1,000 employees would be shifted to other state jobs.
Greece's finances remain under intense EU and IMF scrutiny, and successful implementation of the cutbacks and structural reforms remain a condition for continued release of the loans, set to reach a total (EURO)110 billion ($144.5 billion) over the next three years.
The country is due to receive its second installment of loans next week.
Also Friday, the statistics agency said Greece's unemployment rate fell slightly to 11.6 percent in June from 12 percent in May, but was still well above the 8.6 percent seen a year ago, before the debt crisis.
Separately, the debt management agency said it will auction (EURO)900 million worth of 26-week treasury bills next Tuesday, in the first of a string of monthly short-term debt issues that replace quarterly sales.
However, the interest rates demanded on the market for longer-term 10-year government bonds remains prohibitively high, and Athens can only tap the markets for small amounts and shorter-term loans.
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Associated Press Writers Elena Becatoros in Athens and Costas Kantouris in Thessaloniki contributed to this story.