Greece struggles on for deal on unpopular reforms

Athens: Greece’s government on Saturday struggled on in talks with lenders to secure a 130 billion euro bailout before turning to the trickier task of persuading political leaders to back the unpopular reforms involved in the rescue. On the brink of bankruptcy, Athens must wrap up talks with foreign lenders on the bailout and get political approval for it soon to ensure funds begin flowing in time for the country to pay back €14.5 billion of bonds falling due in mid-March.[caption id=“attachment_203666” align=“alignleft” width=“380” caption=“Greece’s Prime Minister Lucas Papademos. Reuters”]  [/caption] But negotiations with its ’troika’ of international lenders have stumbled over their demands that include cutting labour costs by axing holiday bonuses and lowering the minimum wage - proposals strongly opposed by Greek political party leaders. Athens failed to reach a deal with the European Union, European Central Bank and the International Monetary Fund in marathon negotiations that ended early on Saturday, with crucial issues still unresolved. “The troika is not backing down on wages, holiday bonuses and supplementary pensions,” a Greek government official said after ministers met to discuss the reforms on Saturday. “None of these issues have been resolved. They are all open and the onus is on political leaders.” Finance Minister Evangelos Venizelos was due to continue talks with lenders on Saturday in a bid to clinch agreement before technocrat Prime Minister Lucas Papademos calls the socialist, conservative and far-right leaders in his coalition to seek their blessing. That meeting of party chiefs, initially scheduled for Saturday, has now been put off until Sunday early afternoon, a government source said. Euro zone finance ministers are also holding a conference call on Saturday to discuss Greece’s rescue, Venizelos has said. “There are issues to be resolved but we expect the negotiations to be concluded by tommorrow,” a senior government official told Reuters on Saturday on condition of anonymity. Proof of commitment Increasingly frustrated with Athens’ inability to enact the reforms needed to reshape the recession-hit Greek economy, foreign lenders have demanded proof of the country’s commitment to spending cuts before doling out any more funds. They want all the country’s political chiefs—who are keen not to be linked directly with the painful reforms as they gear up for elections expected in April—to back the measures, irrespective of the outcome at the polls. “Greek political leaders must offer their commitment to the programme,” said a source close to the lenders. “No more loans will be approved if they don’t.” The lenders have demanded extra spending cuts worth about 1 percent of GDP—or just above €2 billion—this year, including big cuts in defence and health spending. Defence spending would be cut by €400 million this year and next, while health spending would be cut by €1.1 billion in 2012, government officials said. The Kathimerini newspaper reported on Saturday that if political leaders did not reach a deal on reforms, Papademos was considering asking them to either authorise a new round of negotiations with the troika or themselves join the discussions. Ordinary Greeks are seething as round after round of austerity measures is imposed on them as the price for saving the country from default. About 2,000 demonstrators clad in black, some hooded or wearing helmets, waved red flags, beat drums and chanted “Burn parliament” as they marched to protest over austerity measures and the politicians they blame for the economic pain imposed on the country. Dozens of leftist protesters also held a demonstration outside the prime minister’s office. Athens has repeatedly said the talks on a bond swap with private holders of Greek debt and on the bailout are in their final stage. But it has failed to secure either deal after weeks of wrangling, largely due to concern that the rescue plan will not do enough to cut Greece’s debt burden to a manageable level. European Union sources said on Friday that euro zone governments may now have to cough up an extra €15 billion on top of the 130 billion agreed in October because of the funds needed to recapitalise Greece’s ailing banks. Athens also wants public creditors like the European Central Bank to take part in the bond swap deal, under which banks and insurers will take real losses of about 70 percent on the Greek debt they hold. The bond swap talks were now the easier part of the overall process to save Greece, Venizelos said earlier on Saturday. Representatives for the banks and insurers are expected to be back in Athens to continue talks over the weekend. Reuters