Showdown expected as Greece seeks two year extension to bailout terms
GREECE’S new government is to ask lenders for two more years to hit fiscal targets, responding to huge public pressure for a softening of an international bailout but setting up a showdown with its euro zone partners.
An official from the small Democratic Left party attending three-party talks before the announcement of a new coalition government said the delay of the bailout deadline and an extension of unemployment benefits were key elements of a new government policy document.
The document was agreed between officials from the conservative New Democracy party, which won an election on Sunday, and its new coalition allies, the PASOK socialists and Democratic Left, the official said.
The policy agreement sets up a difficult negotiation withGreece's euro zone partners, in particular paymaster Germany, which have offered modifications but no radical re-write of a €130bn lifeline agreed in March, which is keeping Athens from bankruptcy.
Prime Minister Antonis Samaras, leader of New Democracy, is expected to unveil his cabinet on Thursday, but it is unlikely to contain any big-hitters from his leftist allies, in an ominous sign of their reluctant support for the new government.
National Bank Chairman Vassilis Rapanos will become finance minister.
The government faces the daunting task of imposing the bailout's terms on a society facing a fifth year of deep economic suffering, worsened by the withering pay, pension and job cuts sought by Greece's lenders in the European Union and the International Monetary Fund.
LEFTISTS KEEP PRESSURE ON GOVERNMENT
The radical leftist Syriza bloc, which wants to tear up the bailout agreement, surged to second place in Sunday's election and will keep the government under constant pressure to soften its terms.
The official, who declined to be named, said the platform called for the renegotiation of terms to secure a two-year extension to the 2014 deadline for Greece to reduce its budget deficit to 2.1pc from 9.3pc in 2011.
Greek officials have said the extension would require an extra €16-€20bn in foreign funding.
The government will also seek to extend the payment of unemployment benefits to two years from one, to offer benefits to the self-employed without work and to limit public sector lay-offs, the official told Reuters.
The document was to be submitted for approval at a meeting on Thursday of party leaders, after which the cabinet will be announced.