Greek coalition has 'basic agreement' on austerity

AP News
Posted: Sep 27, 2012 9:56 AM
Greek coalition has 'basic agreement' on austerity

ATHENS, Greece (AP) — Greece's coalition government reached a "basic agreement" Thursday on a new round of harsh austerity cuts demanded by its international lenders.

The measures, secured after weeks of fruitless efforts, had to be agreed or Greece would have been cut off from vital bailout loans that it needs to pay its way and keep it in the 17-country group that uses the euro.

Finance Minister Yiannis Stournaras said the long-delayed agreement placed him in a stronger negotiating position ahead of talks Monday with representatives of the country's bailout creditors, who will have the final word on the cutbacks.

He said Prime Minister Antonis Samaras' deliberations with the heads of his two junior coalition partners resulted in "a basic agreement" on the measures intended to ax some €11.5 billion ($14.8 billion) off state spending in 2013-14.

Under its bailout commitments, Athens must also boost state revenues by an additional €2 billion over the next two years through tax reform and improved tax collection.

The three-party meeting came a day after more than 50,000 anti-austerity protesters took to the streets of Athens, in a demonstration marred by clashes between hooded anarchist youths and riot police.

Greece has relied on international bailouts since May 2010. In return, it imposed a punishing austerity program, repeatedly slashing incomes, hiking taxes and raising retirement ages. The new measures are expected to include further pension and salary cuts, and raising the age of retirement from 65 to 67.

Parliament is expected to vote on the cutbacks between Oct. 8, when eurozone finance ministers meet in Luxembourg, and the Oct. 18-19 European Union summit, a Greek government official said.

He spoke on condition of anonymity as he was not authorized to discuss the issue on the record.

The government should easily win the vote, despite fierce opposition from anti-austerity parties and potential dissenting votes, as it controls 178 of the house's 300 seats.

Approval from EU, International Monetary Fund and European Central Bank officials monitoring the country's three-year effort to right its finances will allow the disbursement of €31 billion, expected after mid-October.

With that money, whose payment was delayed for months after two successive national elections in May and June, Greece will complete the recapitalization of its battered banking system and pay off long-outstanding debts to domestic suppliers.

Without the cash, the country would have trouble paying its bills. That could force Greece to default on its debts and, possibly, ditch the euro.

The conservative-led coalition has been debating the new cutbacks for about two months, but a deal was delayed by opposition from the two center-left junior partners — coupled with disagreements with EU, IMF and ECB austerity inspectors.

Fotis Kouvelis, head of the small Democratic Left party, said after Thursday's two-and-a-half hour talks that, despite the overall agreement, "some issues are still outstanding."

And Socialist PASOK leader Evangelos Venizelos said he would "struggle to the end to ensure that these measures are not across the board and are fair ... and that they are truly the last," as Samaras has pledged.


Elena Becatoros in Athens also contributed to this article.