Post date: Feb 05, 2012 11:21:54 PM
ATHENS, GREECE (FEBRUARY 5 2012)(REUTERS) - Greek Prime Minister Lucas Papademos said on Sunday (February 5) political leaders of the coalition government agreed to public spending cuts worth 1.5 percent of GDP this year, after talks with the party chiefs, including measures to cut wage and non wage labour costs.
In a meeting between the prime minister and coalition party leaders on the terms of a second bailout loan, leaders agree to spending cuts worth 1.5 percent of GDP.
He confirmed that the three party leaders will meet again on Monday to conclude negotiations on Greece's second bailout package.
Greece's lenders have demanded spending cuts worth about 1 percent of GDP -- or just above 2 billion euros -- this year.
In a written statement, Papademos said the political leaders agreed on taking measures in 2012 to reduce public spending by 1.5 percent of GDP, improving competitiveness through adjustments such as reducing the wage and non wage labor costs, in order to promote employment and economic activity, and the the recapitalization of banks. The statement was not clear however on how cuts would be made in wage costs.
An official of the socialist party said an agreement had not yet been made on labour reforms, such as specifically cutting the minimum wage and bonuses.
Several days of lengthy negotiations with the inspection team of the European Union, European Central Bank and International Monetary Fund, also known as the troika, were stuck on the thorny issue of cutting the minimum wage and holiday bonuses in the private sector, demanded by the troika under the terms of the new bailout loan but oppossed by politicians. With elections looming, the political leaders do not want to be held responsible for imposing more austerity measures on the wages of the public. The conservative New
Democracy and the far-right LAOS party in particular have staunchly opposed further wage cuts, arguing they risk pushing Greece into an even deeper recession and imposing more pain on struggling Greeks.
"I will not contribute to a revolution out of misery which will then burn the whole Europe." said Laos Leader George Karatzaferis fater the meeting.
"For the first time, we are negotiating," Samaras told reporters after the meeting. "They are asking for measures which deepen the recession that the country cannot take. I have been fighting in every way to avert that," he said.
The coalition government must respond to proposals made by the country's international lenders for the new bailout deal by noon (1000 GMT) on Monday, a spokesman for the PASOK socialist party said on Sunday after the talks. Papademos is fighting to prevent Greece from sinking into a chaotic default when big bond redemptions come due next month. His finance minister said euro zone ministers bluntly told him their patience was wearing thin because of Athens' dithering on reforms. Euro zone officials say finance ministers told Greece on Saturday it could not go ahead with an agreed deal to restructure privately held debt until it guaranteed it would implement reforms.
The rescue loan, drawn up in October, also includes the bond swap under which banks and insurers will take real losses of about 70 percent on the Greek debt they hold in a bid to ease Greece's debt burden by 100 billion euros - also known as PSI talks.
The representative negotiating for the banks and insurers on the PSI talks, Charles Dallara, who is the Director of the International Institute of Finance, arrived in Athens late on Sunday and entered the prime ministers office to continue talks on the bond swap deal.