Greece’s Coalition Government, Troika Pause on Budget Talks

Greece and its European Union and International Monetary Fund creditors made progress on talks on a 13.5 billion-euro ($18 billion) package of austerity measures for the next two years and said negotiations would continue next week.

Finance Minister Yannis Stournaras told reporters in Athens after briefing Prime Minister Antonis Samaras on the latest round of negotiations that he hoped the inspectors would give euro-area finance ministers meeting on Oct. 8 a good report.

“Talks are continuing,” Stournaras said. “There are differences and we’re not there yet. We will continue next week. We just hope that we will get a positive presentation from the troika at the eurogroup meeting.”

Negotiations between the government and the inspectors on spending cuts necessary to meet rescue agreements worth 240 billion euros have dragged on for weeks. Agreement on the budget measures are central to to the release of the next payment of 31 billion euros, destined primarily to recapitalize Greece’s banks in a bid to boost liquidity in a cash-starved economy.

Talks have been stalled over reluctance by Samaras and his coalition partners, Evangelos Venizelos of the socialist Pasok party and Fotis Kouvelis of Democratic Left, to sign off on more pension and wage reductions that will hurt Greeks already going through a fifth year of recession. The country’s statistical service said late yesterday that the economy shrank 7.1 percent last year, more than the 6.9 percent previously thought.

Convincing Creditors

Samaras, who formed a governing coalition after winning the country’s second set of elections this year, is trying to convince Greece’s creditors that his government has done enough to secure the next payment as well as an additional two years to implement spending cuts and structural reforms.

German Chancellor Angela Merkel will visit Athens on Oct. 9, a day after the euro-area finance ministers meet, in what is being seen as a signal to critics to silence the debate on pushing Greece out of the euro.

Two bailouts and the biggest debt writeoff in history have so far failed to halt Greece’s recessionary slide, prompting Christine Lagarde, the IMF’s managing director, to signal last month that another writedown might have to be considered.

To contact the reporter on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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