PM forced to rethink cuts

Prime Minister Antonis Samaras is due to meet his coalition partners on Wednesday night in a bid to move closer to an agreement on a new round of spending cuts, which he discussed on Tuesday with European Central Bank President Mario Draghi.

Samaras, PASOK?s Evangelos Venizelos and Democratic Left?s Fotis Kouvelis are due to sit down at 7.30 p.m. to discuss the 11.5-billion-euro austerity package. The troika has rejected about 2.2 billion euros of the cuts and raised doubts about another 3 billion. Sources said that in the wake of meeting Draghi in Frankfurt, Samaras is determined to seal a deal on the reductions as quickly as possible and secure Greece?s next bailout tranche of 31.5 billion euros.

The prime minister said he informed the ECB president that the government is ?determined to meet its commitments and to speed up the recovery of the economy.?

?Both parties agreed that Greece has already taken significant steps towards budgetary consolidation and economic modernization but that major challenges remain,? the ECB said.

Wednesday’s meeting was an opportunity for Samaras to discuss with Draghi ways that the ECB could play a significant part in easing the financial pressure on Athens and reducing Greece?s debt burden, although there was no confirmation that this subject was raised.

The Greek Finance Ministry estimates that if Athens is granted a two-year extension to its fiscal adjustment period, to the end of 2016, there would be a funding shortfall of 20 billion euros. It is thought that the German Finance Ministry estimates this figure to be between 30 and 40 billion euros, while Nomura puts it at 43 billion. Athens has a proposal regarding how the ECB could help cover this shortfall without making it necessary for Greece to receive more funding.

It involves the central bank accepting an extension to the Greek government bonds it holds that are due to mature between next year and 2016. This paper is worth 20.6 billion euros and the plan would be to put back their repayment date until 2020 or later.

In terms of reducing Greece?s debt, the ECB is expected to make a profit of some 10 billion euros from the Greek bonds it bought on the secondary market. The central banks of eurozone member states are also in line for a 3.4-billion-euro windfall from the purchase of Greek bonds. It is yet to be decided if this will be passed on to Greece.

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