Greece agrees new raft of cutbacks

Thu, Aug 2, 2012, 01:00

Greek prime minister Antonis Samaras overcame growing differences with his two coalition partners to secure €11.5 billion of budget cuts and keep international rescue funds flowing.

Mr Samaras brokered the accord with Democratic Left head Fotis Kouvelis and Pasok leader Evangelos Venizelos after the three met yesterday in Athens for the second time this week.

Mr Venizelos, the ex-finance minister who negotiated this year's latest bailout, disagreed with Mr Samaras, saying the premier should be pushing now for more time to implement the steps.

"Cutting spending by €11.5 billion was set as a necessary prerequisite for Greece to remain in the euro," finance minister Yannis Stournaras told reporters after the meeting.

He said the package will now be examined by the so- called "troika" of officials representing the euro area, the European Central Bank and the IMF, who have been in Athens since July 24th to judge whether Greece can get the next batch of funds.

The coalition, formed in June amid public opposition to spending cuts that led to two consecutive elections, is struggling to find common ground on the budget plan.

The cuts are required by lenders in 2013 and 2014 to keep 240 billion euros of aid pledges flowing from two European Union and International Monetary Fund bailouts.

"We should have avoided this new wave of wage and pension cuts, some 6 billion euros, which will keep the country in recession in 2013 and 2014," Mr Venizelos said.

More time "would have allowed for a milder implementation of the measures."

Still, the government must complete its four-year mandate and "we won't lead the country into new elections," he said.

In parliament, a bill on changes to the education system highlighted the growing fissures in the parties supporting the coalition. The legislation was passed with 163 votes in favor and 101 votes against, according to a tally of the vote, televised live on state-run Vouli TV.

Among coalition party members voting against the law, the government's first since taking power, were six members of the socialist Pasok party, including former prime minister George Papandreou and former health minister Andreas Loverdos.

Mr Samaras's government is supported by 179 politicians from the three parties in the 300-seat chamber.

Greece is in a fifth year of a recession that's been worsened by the austerity measures to cut a budget deficit that reached more than five times the euro area's limit in 2009, sparking the continent's debt crisis.

The country conducted the biggest sovereign debt restructuring in history this year before elections in May and June plunged it into political turmoil and put its place in the 17-nation currency bloc at risk.

Mr Stournaras is due to meet with the troika to begin analysing the government's plans today at 2pm. The delegation has extended its stay in Athens to be able to help piece together the package.

Mr Stournaras said he expected to have a final version of the cuts at the end of the month. IMF managing director Christine Lagarde defended the lender's role in Greece and said the nation has made progress even as it needs to deepen structural changes to its economy.

"When I look back to the initial program and the achievements of the Greek economy and the Greek population, it's impressive," Ms Lagarde told reporters in Washington yesterday.

Reuters

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