Coalition agrees to cut 11.5 bln euros as Venizelos, Kouvelis back down

A tense and fraught meeting between Greece?s coalition leaders ended on Wednesday night with PASOK?s Evangelos Venizelos and Democratic Left?s Fotis Kouvelis backing down over their opposition to the way Greece will implement 11.5 billion euros of spending cuts demanded by the troika and ceding ground to Prime Minister Antonis Samaras, who has now taken on full responsibility for the country?s negotiating line in talks with its lenders.

Venizelos and Kouvelis went into Wednesday’s meeting with reservations about agreeing to the cuts now. The PASOK leader in particular had been adamant that only about half of the cuts should be finalized now because of fears that it could have on Greece?s economy, already in the fifth year of recession. The two junior coalition partners also favored the issue of renegotiating the terms of Greece?s bailout now, rather than waiting to regain the trust of the troika.

Samaras, though, insisted that Greece should only begin the process of asking for better terms after the cuts have been agreed and once Athens has shown that it is picking up the pace of structural reforms. The prime minister told his coalition partners that following discussions with European Commission President Jose Manuel Barroso, who visited Athens last week, and with European Council President Herman Van Rompuy, who Samaras spoke to on the phone on Wednesday, he was left in doubt that this was the right strategy. Following a heated discussion, during which Venizelos and Finance Minister Yannis Stournaras exchanged angry words, Samaras?s position won out.

?The prime minister recommended that we should accept the reduction of public spending by 11.5 billion euros as a necessary prerequisite for Greece remaining in the eurozone and being able to negotiate further,? said Stournaras after leaving the meeting. ?This recommendation was accepted.?

Stournaras said that negotiations with the troika would ?begin? and that the details of the savings would be agreed by the end of August. Venizelos indicated that he had grudgingly given his support to the position adopted by the prime minister and finance minister.

?If the Prime Minister believes that immediately making 11.5 billion euros in savings is the only way to secure the country?s position in the eurozone, I am obliged to support him,? he said, adding there was no point in sticking to his strategy anymore. ?When we cannot agree on a domestic level, it is futile to pursue something on the international level.?

He added that the new savings must not be ?unfair? or include ?horizontal measures» and said that a new round of cuts to wages, pensions and benefits would worsen the recession, making demands for new cuts inevitable. Privately, Venizelos admitted that it was unlikely these cuts would be avoided.

The PASOK leader added a jibe about Samaras, saying he did not wish to undermine the government and force elections as the New Democracy leader ?did last November.?

Venizelos also indicated he was unhappy that the conservatives had suggested to Greece?s European partners that PASOK and Democratic Left were obstructing a deal on the cuts demanded by the troika.

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