Looks like Greece will have to miss the October debt payment

In order to shrink the public sector, the government has announced plans to merge existing agencies, abolish others and put tens of thousands of employees on a "reserve" status at 60 percent of their pay.

But the agency mergers have not yet resulted in a single layoff, with employees shuffled from one agency to another: in one case, several employees at the debt-ridden Hellenic Railways have been transferred to public hospitals.

The tactic has left Greece's lenders very skeptical at the government's willingness to shrink the public sector. It now seems that, with its back to the wall and no wiggle room left, the ruling socialists are finally prepared to bite the bullet. But with the constitution expressly protecting civil servants' jobs, the government is looking for ways to go around that obstacle, first by firing contract workers and then tackling the core civil service. Yahoo

The Greek socialists never intended to shrink the public sector, The plan all along was to hold out until bankruptcy.