Greece agrees €11.5bn spending cuts

An EU flag is flies in front of the ancient Acropolis in Athens on May 9, 2012.

Story highlights

  • Greece's three-party coalition has reached agreement on €11.5bn of spending cuts
  • Socialist party leader dropped objections to further planned reductions
Greece's three-party coalition has reached agreement on €11.5bn of spending cuts over the next two years after the socialist party leader dropped objections to further planned reductions in pensions and public sector wages.
Evangelos Venizelos, a former finance minister facing dissent in his PanHellenic Socialist Movement (Pasok), had distanced himself from both coalition partners and Greece's international lenders by demanding the cuts be postponed until 2015-16.
But on Wednesday the junior partners in the conservative-led coalition government of centre-right prime minister Antonis Samaras set aside demands for an immediate renegotiation of the terms of the deal to ease talks with the "troika" of EU and International Monetary Fund lenders.
"The prime minister's proposal was accepted by political leaders," finance minister Yannis Stournaras told reporters after a nearly three-hour-long meeting.
Mr Venizelos said Greece had to demand more time to achieve targets under its bailout package, but he was setting aside his request for now in the interest of the country and to avoid bringing down the six-week-old government.
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A government aide on Wednesday said troika officials helping to fine-tune the 2013-14 programme had rejected Mr Venizelos's argument that wage cuts should be postponed until economic growth resumes.
"It is inconsistent that Mr Venizelos put together this two-year programme in February with the EU and IMF when he was finance minister and now opposes it," the aide added.
Mr Samaras is trying to secure the disbursement next month of a much-delayed €31.2bn loan tranche. Troika officials are due to return early in September to assess progress and prepare a report that will determine whether Athens can draw down the funds to recapitalise its banks and support the budget.
Christos Staikouras, deputy finance minister, said in a television interview on Tuesday that the government was running out of cash.
"Cash reserves are almost at zero. It's not possible to say how long they will last because that depends on the budget execution, but we are close to the brink," Mr Staikouras said.
The looming cash crunch means Greece may have to raise an extra €3.2bn in treasury bills this month to cover the repayment due on Aug 20 of a bond held by the European Central Bank, as the EU and IMF would be reluctant to meet a request for extra funding by Athens before its parliament has approved the spending cuts.
Yet Mr Samaras is expected to give a new push to the country's lagging privatisation programme, regardless of the dispute with the Pasok leader over the medium-term package. Preparations to dispose of three large, state-owned enterprises -- Hellenic Postal Savings Bank, the profitable state gaming company OPAP, and the state lottery -- are to be stepped up with the aim of agreeing a sale by the end of this year.
Seven potential investors -- five foreign and two Greek -- have also expressed interest in a strip of coastal land offered for development on the tourist island of Rhodes, according to an official at the Hellenic Asset Development Fund (TAIPED), the privatisation agency.