Leader of leftist bloc in Greek coalition says party cannot accept labour reforms required by lenders

The leader of one of the parties in Greece's fragile coalition government has told The Independent that his leftist bloc cannot accept harsh labour reforms requested by the nation's international lenders, raising the prospect of further delays to the release of bailout cash crucial to averting bankruptcy.

With only one week until politicians will be called upon to vote on a fresh raft of austerity measures that would seal the release of €31.5bn, Fotis Kouvelis, leader of the Democratic Left, said his party would "in no way" back an austerity bill if it included controversial labour reforms.

"We have agreed to specific fiscal measures through tough negotiations that are painful for the Greek society," Mr Kouvelis said in an interview. "But the labour issues as they are at the moment cannot be voted for."

The leader of Democratic Left – a junior partner in Greece's coalition government – sought to allay fears of a political crisis by reaffirming his strong support to the government. But his vocal opposition reflects serious cracks in a coalition formed after two tumultuous general elections earlier this year. Although the austerity measures could pass the 300-seat parliament without the support of Mr Kouvelis' 17 politicians, there are fears that staunch opposition from the Democratic Left could spark a wave of rebellion among MPs from the socialist Pasok, the third-largest party in parliament and another coalition partner.

The Democratic Left has conceded to axing wages, pensions and healthcare funding as part of €13.5bn-worth of austerity cuts commanded by Greece's international lenders for the next two years. Implementation of the measures is seen as crucial to stop the country running out of money and being forced to leave the single currency.

The most recent tussles are over proposals to abolish a 10 per cent salary increase for employees when they marry, and to make the national collective labour agreement only apply for unionised employees.

Greece registers one of the highest poverty rates in the European Union. According to the European statistics agency, one in three Greek families lives in poverty or social exclusion.

The so-called Troika of inspectors from the European Union, European Central Bank and International Monetary Fund hope change to the work market will boost Greece's sluggish competitiveness.

But Mr Kouvelis, a lawyer, said the labour reforms would not help the country meet its targets and reduce its public deficit and expenses, and he would not back down on his opposition to reforms that would "demolish the labour rights" of impoverished Greeks. "Growth and competitiveness cannot be supported by weakened workers," Mr Kouvelis said.

"Whether investments come or not to Greece doesn't only depend on the cost of labour, but mainly on the creation of a climate free of complicated procedures, bureaucracy and with a clear tax system. These are the elements that can attract foreign investment."

Impervious to the opposition of his junior party, the Prime Minister, Antonis Samaras, announced on Tuesday that negotiations with the Troika had ended with agreement on the measures Greece must take to secure the next instalment of the €130bn loan it was promised last year.

"The problem from now on is not this or that particular measure... It's what could happen if this [loan] agreement is not voted and the country is led to chaos," the Prime Minister warned.

While his admonitory tone provoked anger from Pasok's leader, Evangelos Venizelos, he did tell his party to back the measures.

Yesterday, Mr Samaras' government barely survived its first test in Parliament as a privatisation bill was voted through with a slim majority. Mr Kouvelis and Mr Venizelos were both absent from the vote in a show of protest.

Mr Kouvelis is keen to stress his party still supports the coalition government. The mild-mannered leader remains hopeful that the disagreement can be resolved by tabling the disputed reforms in a separate bill – an idea that has already been shot down. As Athens teeters on the verge of bankruptcy – its coffers run dry by the end of this month – cracks are appearing in the coalition with a growing number of voices hardening their rhetoric against Mr Samaras. "If [Samaras] brings [the labour reforms and cuts] all in one bill it means he doesn't respect his partners," Theodoros Margaritis, a senior party official of the Democratic Left, warned.

The measures need to be voted in by 12 November, when European finance ministers are scheduled to meet to decide on the disbursement of Greece's vital aid. A main labour union is calling for a 48-hour nationwide strike to coincide with the vote.

Mr Kouvelis asked the Troika not to demand too much from a people who have shouldered such pain: "Our partners need to know that the social balance is a sine qua non element for any programme to continue."

Stumbling blocks: The Troika's demands

Collective labour agreement

The Troika wants the country's national labour agreement to apply only to unionised employees instead of all workers. Democratic Left says that would leave many workers without protection.

Marriage benefit

The Troika wants to scrap a 10 per cent increase employees get when they get married. Democratic Left warns that all married employees will have their salaries cut by 10 per cent. Unions say more than 3.5 million households will be affected.

Dismissal

The Troika wants to cut indemnities for employees who have worked at a company for more than 12 years. Unions fear that will encourage companies to lay off older staff and hire young workers cheaply.

Minimum Wage

The Troika wants the minimum wage to be set by law, instead of negotiated between unions and employers. Democratic Left says most salaries will have an aggregate value above the minimum wage, thus reducing workers' purchasing power.