Greek coalition leaders back outline of new cuts

Axel Schmidt/dapd

(AP) ATHENS, Greece - Greek Prime Minister Antonis Samaras and his junior coalition partners have reached a broad agreement on the latest round of spending cuts demanded by the country's creditors to keep vital rescue loans flowing, the country's finance minister said Wednesday.

Yannis Stournaras said officials from the three parties in the shaky, conservative-led coalition would hold further talks to settle remaining "technical" issues.

"The basic scenario has been finalized, there are one or two minor issues that remain unresolved," Stournaras said after attending Samaras' meeting with the heads of the smaller Socialist PASOK and Democratic Left parties.

The two-month-old government has been deliberating for weeks on how to save some 11.5 billion euro ($14.4 billion) in 2013 and 2014. The cutbacks form part of Greece's bailout commitments to its European partners and the International Monetary Fund, who have protected the country from bankruptcy since May 2010 in exchange for a harsh austerity program designed to reduce yawning budget deficits.

Austerity inspectors from the so called troika - the European Union, International Monetary Fund and European Central Bank - are due in Athens early next month for a new overview of the country's efforts. A favorable report would clear the way for payment of the next, 31 billion euro rescue loan installment. Otherwise, Greece will run out of cash and could be forced to leave the 17-nation eurozone, triggering further financial chaos across the 17 countries that use the euro.

The new cutbacks are expected to include further reductions in pensions and broader civil service pay cuts. Both would be politically embarrassing for Samaras' center-left coalition partners who campaigned on an anti-austerity ticket in Greece's two elections.

It took three meetings with Samaras earlier this month for the two to grudgingly agree to work on the new measures.

Democratic Left leader Fotis Kouvelis told reporters after Wednesday's talks that fine-tuning would continue.

"Efforts are being made to avoid horizontal cuts, which I strongly oppose, and to protect lower income-earners from further pain," he said.

Since the country's debt crisis broke in late 2009, Greeks have had to deal with repeated income cuts and tax hikes, which have largely contributed to the country's four-year recession. At the end of this year, the cumulative economic contraction since 2008 is expected to reach 20 percent. Tens of thousands of businesses have closed, and unemployment is above 23 percent - with more than one in two young workers jobless.

Kouvelis said he opposed cuts in local authority funding and in farmers' pensions. He has also disagreed with proposals to suspend thousands of civil servants - who are guaranteed jobs for life - on reduced pay ahead of retirement.

Kouvelis said the three party leaders would hold new talks in coming days.