Greek leaders agree austerity cuts
Greek political leaders have broadly agreed on a nearly €12 billion austerity package despite reservations over wage and pension cuts to bring Athens closer to a final deal on the contentious plan.
After weeks of haggling over the budget cuts, Prime Minister Antonis Samaras's allies have struck a deal on the composition of the package and are ironing out final details of how salary and pension cuts will be spread, officials said.
Nearly 70,000 Greeks marched to parliament yesterday in one of the biggest demonstrations yet against cuts that threaten a new round of wage and pension cuts for tens of thousands of the population. That is putting pressure on coalition politicians but the government is pressing ahead with steps to secure the next batch of bailout funds - vital to keeping the state solvent.
"There is a basic agreement, we're moving forward to the final negotiations," Finance Minister Yannis Stournaras said after a meeting of the three leaders in Mr Samaras's conservative-led government.
The focus in Athens now shifts to clinching a deal with the troika of European Commission, European Central Bank and the International Monetary Fund lenders, who return to the city early next week to conclude talks on the package.
The government needs to seal the deal soon so it can push the austerity package through parliament before an October meeting of euro zone finance ministers.
"We hope that within the following week we can have a final agreement and be able to take these measures to parliament for approval," said a finance ministry official. Athens hoped to have the package voted into law before the October 8th Eurogroup meeting, he said.
Mr Samaras's allies - leftist chief Fotis Kouvelis and Socialist leader Evangelos Venizelos - had so far held up approval of the package by opposing across-the-board cuts in wages and pensions as well as plans to fire civil servants.
Both the junior partners - whose support is falling in opinion polls - are under rising pressure from their voter base to water down the austerity package, the bulk of which includes a new round of wage, pension and welfare benefit cuts. Two of the lawmakers in Mr Kouvelis's Democratic Left party have already said they will vote down the measures in parliament.
After the latest round of talks, Mr Kouvelis acknowledged the leaders still had to work through "outstanding" issues but confirmed that a "basic framework" for a deal had been reached.
In a bid to overcome differences, the leaders agreed to back spending cuts worth €10.5 billion instead of the previous goal of €11.5 billion, making up the shortfall by raising targeted tax proceeds to €3 billion, officials said.
They also agreed that Athens must demand the measures be spread over four years instead of two and seek guarantees that Greece's next tranche of aid worth over €31 billion will be paid out if the measures are backed by parliament, they said.
The leaders also want a clause inserted in the package that allows Athens to roll back some of the pension and wage cuts if Greece overshoots its targets or produces savings in other areas, Nr Venizelos told reporters.
But with Greece facing certain bankruptcy and a possible euro zone exit without fresh aid, the country is hardly in a position to drive a hard bargain with the troika.
The lenders had already rejected parts of the government's initial package of proposals for the cuts and it remains to be seen if they will accept tweaking the composition of the package in favour of higher tax revenues - long considered Greece's Achilles heel.
Athens's last round of discussions with the troika had already descended into tension and disagreement over plans to reform the country's bloated public sector, while sources have told Reuters the EU and IMF face a widening rift of their own on how to solve the country's debt problem.