Parties backing Greece’s coalition government were to hold a second day of emergency talks yesterday on an austerity deal with rescue creditors, after an intense weekend of negotiations failed to produce a breakthrough needed to avert bankruptcy next month.
Greek Prime Minister Lucas Papademos was to meet leaders of the three parties backing his coalition — which all publicly oppose steep cuts in private sector pay demanded by negotiators representing Greece’s creditors from the eurozone and the IMF.
Before the afternoon meeting, party leaders pledged to give their initial response to the demanded cutbacks and Papademos will hold new talks with EU-IMF debt inspectors.
The new 130 billion euro (US$171 billion) bailout deal is vital for Greece to avoid bankruptcy next month, as it cannot cover a 14.5 billion euro bond repayment due on March 20 without the rescue funds.
The debt-crippled country has been kept solvent since May 2010 by payments from a 110 billion euro international rescue loan package. When it became clear the money would not be enough, a second bailout was decided in October last year.
Its implementation depends on Greece’s progress in separate talks with banks and other private bondholders to forgive 100 billion euros in Greek debt, in exchange for a cash payment and new bonds with more lenient repayment terms.
Over the weekend, Greek officials held a conference call with eurozone finance ministers, as well as exhaustive rounds of talks in Athens with EU-IMF debt inspectors, senior bank negotiators and Greek political party leaders, to try and hammer out a deal on the new cutbacks.
Greeks have already been subjected to two years of harsh austerity, suffering significant cuts in pensions and salaries, coupled with repeated tax hikes and an increase in retirement ages.
An announcement from Papademos’ office late on Sunday said an agreement had been reached to cut spending this year by 1.5 percent of GDP — about 3.3 billion euros — improve competitiveness by slashing wages and non-wage costs and recapitalize banks without nationalizing them.
However, the three coalition backers — former Greek prime minister George Papandreou of the Panhellenic Socialist Movement, conservative Antonis Samaras of New Democracy and George Karatzaferis of the right-wing populist Popular Orthodox Rally — differed as to what this would mean in detailed proposals.
“We are in the middle of a major struggle. Right now, the developments are satisfactory,” Karatzaferis said, adding that EU-IMF negotiators had backed away from a demand to axe annual salary installments given to Greek workers as holiday bonuses.
Rescue lenders are also seeking firings in Greece’s large public sector, a drop in the 750 euro gross minimum monthly wage and cuts in lump-sum retirement payouts, as part of a long list of cost-cutting demands.
Unions and employers’ associations oppose the wage cuts, arguing it would worsen a recession in its fourth year and increase unemployment, already at about 19 percent.
Also yesterday, left-wing opposition parties were planning two separate protest rallies in central Athens, against the proposed cuts.