Greek PM gets initial backing of parties for latest cuts
Greek Prime Minister Lucas Papademos arrives at his office in Athens yesterday for a meeting with Greek political leaders to try and convince them to sign off on a €130bn rescue package. Yiorgos Karahalis/reuters
Greek Prime Minister Lucas Papademos secured an outline agreement from the three political party leaders supporting his interim government on measures demanded by international creditors to release a €130bn financial rescue package.
The four men agreed in a five-hour meeting to make additional budget cuts this year equal to 1.5pc of gross domestic product, according to an emailed statement yesterday from the premier's office in Athens.
The four also agreed on a framework for bank recapitalisations, for ensuring the viability of auxiliary pension funds and for measures to reduce wage and non-wage costs to boost competitiveness.
The accord marked a step forward in a series of tense negotiations in Athens over the weekend.
Earlier in the day, Mr Papademos concluded the latest round of negotiations with representatives of the International Monetary Fund, the European Union and the European Central Bank.
The troika wants Greece to deliver another dose of what are certain to be hugely unpopular reforms in return for providing that latest lifeline.
The troika is also still attempting to negotiate a €100bn debt writedown with private creditors as part of the effort to extricate Greece from its fiscal quagmire.
With the country's stability at stake, Mr Papademos is racing to clinch agreement on a plan that has been in the works since July, with talks between international monitors and Greek officials running in parallel with discussions among the prime minister's coalition members and Greece's government and its private creditors.
Antonis Samaras, the head of the second-biggest party, New Democracy, indicated opposition to some of the measures which the troika of international creditors have proposed.
"They are asking us for greater recession, which the country can't take," Mr Samaras said as he left the meeting with Papademos. "I will fight to avoid that." Greece's efforts to win a second bailout from international creditors have teetered in the balance over the past three days as negotiations in Athens failed to clinch an agreement. Greek Finance Minister Evangelos Venizelos said yesterday the talks were "on a razor's edge".
Facing a €14.5bn bond payment on March 20 and general elections as soon as April, Mr Papademos must heed international demands for greater austerity to complete the talks on a second aid package in time.
Open questions involve how much more aid Greece needs, how much more austerity is required, and how to involve the European Central Bank in the private-sector creditor debt swap.
EU and IMF officials want guarantees from Greek political leaders that they will stick after the coming general elections to pledges made now to receive financing. The Greek government has managed to thrash out an agreement on issues including the recapitalisation of the country's banks and the sale of state-owned assets.
But calls from the troika for Greece to slash its public-sector workforce and fire thousands of police, army and other employees are being resisted by the government.
(Additional reporting -- Bloomberg)