Bloomberg News

Greek Coalition Leaders to Back $14 Billion in Budget Cuts

August 01, 2012

Greek Prime Minister Antonis Samaras wrested an agreement from his two coalition partners on 11.5 billion euros ($14 billion) of budget cuts required to qualify for international rescue funds and keep the country in the euro area amid disagreements on when to implement the measures.

Samaras brokered the accord with Democratic Left head Fotis Kouvelis and Pasok leader Evangelos Venizelos after the three met today in Athens for the second time this week. Venizelos, the former finance minister who negotiated this year’s latest bailout, disagreed with Samaras’s insistence on not immediately pushing for at least another two years to implement the steps.

“Cutting spending by 11.5 billion euros was set as a necessary prerequisite for Greece to remain in the euro,” Finance Minister Yannis Stournaras told reporters after the meeting. He said the package will now be examined by the so- called “troika” of officials representing the euro area, the European Central Bank and the IMF, who have been in Athens since July 24 to judge whether Greece can get the next batch of funds.

The coalition, formed in June amid public opposition to spending cuts that led to two consecutive elections, is struggling to find common ground on the budget plan. The cuts are required by lenders in 2013 and 2014 to keep 240 billion euros of aid pledges flowing from two European Union and International Monetary Fund bailouts.

‘Milder Implementation’

“We should have avoided this new wave of wage and pension cuts, some 6 billion euros, which will keep the country in recession in 2013 and 2014,” Venizelos said. More time “would have allowed for a milder implementation of the measures.”

Still, the government must complete its four-year mandate and “we won’t lead the country into new elections,” he said.

In Parliament, a bill on changes to the education system highlighted the growing fissures in the parties supporting the coalition. The legislation was passed with 163 votes in favor and 101 votes against, according to a tally of the vote, televised live on state-run Vouli TV.

Among coalition party members voting against the law, the government’s first since taking power, were six members of the socialist Pasok party, including former Prime Minister George Papandreou and former health minister Andreas Loverdos.

Samaras’s government is supported by 179 lawmakers from the three parties in the 300-seat chamber.

Greece risks running out of money without the disbursement of 4.2 billion euros due in June as the first installment of a 31 billion-euro transfer.

The country may sell 6 billion euros of Treasury bills, 2 billion more than initially planned, and tap bank recapitalization funds in order to cover its financing needs, the Kathimerini newspaper reported today, without saying how it got the information.

The funds will be used to cover 3.2 billion euros of redemptions for bonds held by the ECB that mature Aug. 20, the Athens-based newspaper said.

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net


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