Greek coalition has ‘basic agreement’ on austerity

After weeks of fruitless efforts, the heads of the three parties in Greece’s governing coalition have struck a basic deal on a new round of harsh austerity measures required for the country to continue getting vital rescue loans, officials said Thursday.

Finance Minister Yiannis Stournaras said the long-delayed agreement placed him in a stronger negotiating position ahead of talks Monday with representatives of the country’s bailout creditors, who will have the final word on the cutbacks.

He said Prime Minister Antonis Samaras’ deliberations with the heads of his two junior coalition partners resulted in «a basic agreement» on the measures intended to ax some 11.5 billion euros ($14.8 billion) off state spending in 2013-14.

Under its bailout commitments, Athens must also boost state revenues by an additional 2 billion euros over the next two years through tax reform and improved tax collection.

The three-party meeting came a day after more than 50,000 anti-austerity protesters took to the streets of Athens, in a demonstration marred by clashes between hooded anarchist youths and riot police.

Greece has relied on international bailouts since May 2010. In return, it imposed a punishing austerity program, repeatedly slashing incomes, hiking taxes and raising retirement ages. The new measures are expected to include further pension and salary cuts, and raising the age of retirement from 65 to 67.

Approval from European Union, International Monetary Fund and European Central Bank officials monitoring the country’s three-year effort to right its finances will allow the disbursement of 31 billion euros, expected after mid-October.

With that money, whose payment was delayed for months after two successive national elections in May and June, Greece will complete the recapitalization of its battered banking system and pay off long-outstanding debts to domestic suppliers.

Without the cash, the country would have trouble paying its bails. That could force Greece to default on its debts and, possibly, ditch the euro.

The conservative-led coalition has been debating the new cutbacks for about two months, but a deal was delayed by opposition from the two center-left junior partners – coupled with disagreements with EU, IMF and ECB austerity inspectors.

Fotis Kouvelis, head of the small Democratic Left party, said after Thursday’s two-and-a-half hour talks that, despite the overall agreement, «some issues are still outstanding.”

And Socialist PASOK leader Evangelos Venizelos said he would «struggle to the end to ensure that these measures are not across the board and are fair … and that they are truly the last,» as Samaras has pledged. [AP]

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