Greece to Pare Spending in Defense, Investment to Close Gap

Greece will make up a 325 million euros ($427 million) gap in unaccounted for austerity measures required for a second rescue package from cuts to defense, public investment and local authorities, two government officials said.

The spending cuts were decided at a Cabinet meeting in Athens today and need to be approved by the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund, said the officials, who declined to be identified. Cuts will also made in the health budget, one of the officials said.

Talks between the Greek government and the troika over the conditions for a 130 billion-euro financing package stalled last week over disagreements over where to find 625 billion euros of spending cuts. A meeting of euro area finance ministers on Feb. 9 said Greece would need to pass approve legislation through Parliament on economic reforms and detail how it would find the remaining savings before it could approve the rescue package.

Greece decided last week before the troika talks broke up that cuts to pensions would make up the other 300 million euros. Cuts to pensions at state-owned companies and bank pensions will equal 100 million euros, while another 200 million euros in savings will come from cuts to auxiliary pensions, said another government official, who also declined to be identified.

The details of the 300 million euros in pension cuts are already approved by leaders of the parties backing the interim government of Prime Minister Lucas Papademos, the official said.

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