Greek PM's allies seek more time for austerity cuts-sources

Reuters News
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Posted: Jul 30, 2012 1:22 PM
Greek PM's allies seek more time for austerity cuts-sources

By Lefteris Papadimas and Dina Kyriakidou

ATHENS (Reuters) - Greek Prime Minister Antonis Samaras's allies are pushing for two more years to implement unpopular austerity cuts before they sign off on them, sources close to the parties said on Monday, potentially delaying a deal on the savings demanded by lenders.

The three parties in Samaras's coalition have agreed on the bulk of the nearly 12 billion euros ($14.7 billion) in cuts that Greece must produce to satisfy inspectors from the European Union and International Monetary Fund bailing out the nation.

But his two leftist partners insisted during an inconclusive meeting on Monday that Greece needed more time to implement them in the wake of a deeper than expected recession.

"There is agreement on the strategic plan. Discussions will continue, there will be another meeting in the next few days," Democratic Left leader Fotis Kouvelis told reporters after the two-hour-long talks.

Hours before the three leaders resumed talks to nail down the final 1.5 billion euros in cuts, the socialists and moderate leftists backing Samaras banded together to demand the cuts be spread out over four years instead of two, party sources said. Greece's bailout insists on the cuts in 2013 and 2014.

"The two leaders have agreed to ask for an extension of the program because all these harsh measures cannot be implemented in two years' time," a party official said after talks between Kouvelis and Socialist chief Evangelos Venizelos earlier on Monday.

A second party official said the Socialists - facing the brunt of voter anger over their support for austerity - wanted 6.7 billion worth of cuts pushed through in 2013 and 2014, with the remaining cuts saved for the following two years.

That plan, however, was expected to meet resistance from Samaras, who wants to restore Greece's rapidly sinking credibility with lenders as a first step before trying to renegotiate the terms of the deal.

"We are trying to find the perfect mix," Finance Minister Yannis Stournaras told reporters after the meeting. "We all agree that two more years are needed, that the road is uphill and difficult."

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All three parties in Samaras's government agree that Greece requires additional time to meet its debt targets because of a deeper-than-expected slump that has been likened to a Greek version of America's "Great Depression".

But Venizelos, the once-powerful finance minister who negotiated the reviled bailout, is particularly keen to distance himself from the latest round of cuts as his party tries to rebuild after being pummeled in elections this year.

The once-dominant Socialists were beaten to a lowly third place in the June vote behind the radical leftist Syriza group.

Kouvelis' Democratic Left party, which campaigned against the 130-billion-euro rescue before allying with the victorious conservatives, is also under pressure to show voters it will not sign up to new austerity cuts without a fight.

The bickering among Greek political leaders comes against a backdrop of increasing impatience from the country's European partners and the IMF, who must once again decide whether to continue funding the country or cut it loose from the euro zone.

Mired in its fifth year of recession and wholly reliant on bailout funds, Greece is set to run out of money within weeks if a new tranche of aid is withheld - leaving it at risk of crashing out of the single currency.

Even if the political leaders were to seal agreement on the cuts required under its bailout, a growing sense of gloom has set in on the country's future in the euro.

Speculation has grown that Greece might need a second debt restructuring to bring its debt back on a sustainable footing and that its 130-billion-euro bailout may need to be hiked by a further 20-50 billion euros - at a time when there is no appetite to give Greece more time or money.

Policymakers are working on "last chance" options to bring Greece's debts down and keep it in the euro zone, with the ECB and national central banks looking at also taking significant hits on the value of their bond holdings, officials have said.

(Writing by Deepa Babington and Dina Kyriakidou; Editing by Michael Roddy)