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Tags: Greece | government | new | cuts

Greek Coalition Government Wrestles with New Cuts

Monday, 30 July 2012 04:02 PM

The three parties in Greece's young coalition government failed Monday to finalize a major new package of budget savings that rescue lenders are demanding as a condition for continued bailout funds the country needs to avoid getting forced out of the eurozone.

But junior coalition partners said the meeting under conservative Prime Minister Antonis Samaras reached an agreement on the debt-crippled country's "overall strategy" — including that it should obtain a two-year extension on its austerity and reform deadlines.

Finance Minister Yannis Stournaras told journalists that the government is still working to precisely identify what kinds of spending cuts to include in the new €11.5 billion ($14.1 billion) package for 2013-14, although the three coalition partners have signed off on the bulk of the plan.

"We are trying to find the best possible mix," he said after the two-hour meeting. "We all agree that about €11.5 billion must be found in spending (cuts), we all agree that we need another two years, and of course we all agree that our path is uphill and difficult."

But Stournaras stressed that the final decisions should not hamper the country's efforts to seek a renegotiation of its harsh bailout terms, "and, above all, (should) not annul our country's ability to remain within the eurozone."

If Athens loses its rescue loan lifeline from its European partners and the International Monetary Fund, it will be unable to pay state salaries and pensions or service its huge debt. That kind of disorderly bankruptcy would likely force Greece to abandon the euro — whose rate of exchange it cannot control — and return to a devalued form of its old drachma currency. That would make the economy more competitive but condemn large sections of the population to abject poverty.

Junior left-wing coalition partner Fotis Kouvelis admitted that Athens must appease creditors through cutbacks.

"But we also face Greek society, which can take no further burden," he added after the talks. "We discussed and fully agreed on the strategic planning to address all these problems."

Before the meeting, government spokesman Simos Kedikoglou refused to rule out new pension and salary cuts — even after two and a half years of austerity.

"This €11.5 billion guarantees our access to far greater amounts of money ... So there is pressing need to come up with that €11.5 billion," Kedikoglou told private Antenna television.

Debt inspectors from the EU, European Central Bank and IMF — known as the troika — also resumed meetings with government officials to try to finalize the new austerity measures.

Kedikoglou said the government, formed after a general election last month, was fighting to regain the country's international credibility after Greece repeatedly missed fiscal targets set under bailout agreements.

"For two and a half years, we haven't made any (target). What we are striving to do with structural reforms is to create a simpler and more effective government," Kedikoglou said.

Shares on the Athens Stock Exchange, meanwhile, were boosted by gains in Europe. Greek banking shares in particular were rallying after the government announced Friday it will sell state-run ATEBank to Piraeus Bank. ATEBank's weak investments will remain under state control.

Piraeus Bank said Monday the deal cost it €95 million ($116.3 million).

The general index in Athens closed up 2.3 percent, with banking sector shares up 9 percent.

ATEBank's employees' association launched rolling 24-hour strikes to protest the deal. The Greek Federation of Bank Employee Unions, OTOE, went ahead with a 24-hour strike to protest cuts made under Greek austerity measures.

© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Monday, 30 July 2012 04:02 PM
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