Bloomberg News

Samaras Secures Greek Budget Plan as Coalition Discord Grows

August 01, 2012

Greek Prime Minister Antonis Samaras overcame growing differences with his two coalition partners to secure 11.5 billion euros ($14.1 billion) of budget cuts and keep international rescue funds flowing.

Samaras brokered the accord with Democratic Left head Fotis Kouvelis and Pasok leader Evangelos Venizelos after the three met yesterday in Athens for the second time this week. Venizelos, the ex-finance minister who negotiated this year’s latest bailout, disagreed with Samaras, saying the premier should be pushing now for more time 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.

Fifth Year

Greece is in a fifth year of a recession that’s been worsened by the austerity measures to cut a budget deficit that reached more than five times the euro area’s limit in 2009, sparking the continent’s debt crisis. The country conducted the biggest sovereign debt restructuring in history this year before elections in May and June plunged it into political turmoil and put its place in the 17-nation currency bloc at risk.

Stournaras is due to meet with the troika to begin analyzing the government’s plans today at 2 p.m. The delegation has extended its stay in Athens to be able to help piece together the package. Stournaras said he expected to have a final version of the cuts at the end of the month.

IMF Managing Director Christine Lagarde defended the lender’s role in Greece and said the nation has made progress even as it needs to deepen structural changes to its economy.

“When I look back to the initial program and the achievements of the Greek economy and the Greek population, it’s impressive,” Lagarde told reporters in Washington yesterday. “There is still a lot that the country can do.”

Free Food

Members of the far-right Golden Dawn party, which is represented in parliament, handed out free food to Athenians yesterday, provided those coming forward showed they were Greek.

Later, workers from the Agricultural Bank of Greece (TELL) SA picketed the Finance Ministry to protest against last week’s fire-sale of the bank to Piraeus Bank SA. (TPEIR) The sale was part of changes mandated by international lenders after Greek banks suffered losses on their holdings of government bonds.

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 editors responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net Craig Stirling at cstirling1@bloomberg.net


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