Greece has scraped together a plan to save nearly 12 billion euros over the next two years in an increasingly desperate effort to convince visiting EU and IMF inspectors it deserves to be saved rather than pushed out of the eurozone.
After days of wrangling, the new conservative-led government hammered out the austerity cuts hours before top officials from its foreign lenders began a series of meetings on Thursday to assess Greece's compliance with the terms of its latest bailout.
“The government has finalised the plan and will present it later today to political leaders,” a senior finance ministry official told Reuters.
The 11.7 billion euros in savings for 2013 and 2014 will be submitted for approval to the troika of EU, IMF and ECB lenders after the three parties in Prime Minister Antonis Samaras's government sign off on it on Thursday, a Greek official said.
“There's goodwill and we're on a good course,” the official said after the finance minister met visiting troika officials.
Near-bankrupt Greece is waging an uphill battle to convince skeptical lenders it merits further aid despite a history of failed pledges to reform and hit targets under two bailouts from the European Union and International Monetary Fund.
A conservative victory in last month's election averted the imminent risk of a Greek eurozone exit, but speculation of that has intensified once again amid the realization that the country is way off track in meeting the terms of its latest bailout.
The chances of Greece leaving the euro in the next 12-18 months have risen to about 90 percent and Athens is most likely to quit the single currency within the next two to three quarters, U.S. bank Citi said in a report.
In more bad news for Greece, ECB data released on Thursday showed deposits at Greek banks hit their lowest level in six years in June as savers worried about the country exiting the eurozone pulled their money out.
Eurozone partners are keen to avoid a Greek exit that drags down bigger crisis-hit nations like Spain and Italy, but also face the growing reality of a third bill and debt restructuring to save Greece that they cannot afford.
Samaras's government, facing a juggling act of its own as it tries to reconcile opposing demands from home and abroad, is hoping Greece can win back lost credibility by reforming its bloated public sector and restarting its privatization drive.
But it has faced resistance from its own ranks as well as from unions and an emboldened opposition as it has tried to identify the 11.7 billion euros worth of cuts promised under its bailout, which are set to heap more misery on the long-suffering Greek people.
About 5 billion euros of those cuts will come from areas overseen by the labor ministry, including pensions and welfare benefits -- a difficult move for Samaras who campaigned on a pledge to renegotiate the bailout to lessen the burden on Greeks.
But with Greece set to run out of cash in a few weeks without further support from its lenders, Samaras's government has found its hands tied. It has already been forced to put its request for an additional two years to hit debt targets on the backburner until it can claw back lost credibility.
“What we want is clear: an extension of the fiscal adjustment program. We always bring up this issue and we did so again today,” the Greek official said after Thursday's talks.
“They made clear that they want us to implement everything the government committed to in March.”
The remaining cuts will be spread out across various ministries, including a big chunk from the health ministry.
The troika is due to wrap up its visit in early August but is not expected to finalize its assessment of Greece's progress until September. EU Commission President Jose Manuel Barroso is also due to meet Samaras later on Thursday, in his first visit to Athens since June 2009. [Reuters]