Greece and representatives of the country’s international lenders agreed to take a week-long break from inconclusive talks to carve out an 11.5 billion-euro ($14.9 billion) budget-cut package that’s key to receiving aid funds.
The International Monetary Fund, the European Commission and the European Central Bank said in a joint statement their mission to Athens for financial talks will take a “brief pause” and “expects to return to Athens after about a week.”
“The mission has had productive discussions with the authorities since early September and has made good progress during this period,” said the group, known as the “troika,” yesterday. A Greek finance ministry official said he hoped that the package will be finalized before the troika’s return.
Prime Minister Antonis Samaras has struggled for two weeks to broker an agreement with the troika and his coalition partners on a package that will include more than 7 billion euros of cuts to wages, pensions and benefits in a country battling a fifth year of recession and with nearly a quarter of the workforce unemployed. Greece’s two biggest unions plan to hold a 24-hour general strike on Sept. 26.
The troika, representing the international lenders in Greece’s bailout package, have already said some of the reductions don’t go far enough, repeatedly forcing all parties back to the negotiating table.
Samaras said he is confident that his coalition government will hold together and build the domestic political backing he has said is necessary to restore Greece’s credibility and keep the country in the euro.
“We are absolutely decided,” Samaras said yesterday on the sidelines of a conference in Rome. “This is a deal that is not simply party oriented, it’s nation oriented.”
The package needs to be presented at a Sept. 28 meeting of euro-area finance ministry officials, a Greek Finance Ministry official said. Finance ministers from the 17-nation group are expected to decide on the budget measures on Oct. 8.
Greek 10-year bonds advanced, pushing the yield on the securities below 20 percent for the first time since March 29. The yield dropped 62 basis points, or 0.62 percentage points, to 19.93 percent yesterday.
Samaras’ plans were rejected Sept. 20 for the third time in less than two weeks by Democratic Left leader Fotis Kouvelis and Pasok leader Evangelos Venizelos, the junior partners in the coalition.
“The troika must stop attacking Greek society,” said Kouvelis. “The troika must understand there are limits.”
A Finance Ministry official said the same day 9.5 billion euros of the package had been agreed upon, with 6.5 billion of that coming from cuts in pensions, wages and benefits. An increase in the retirement age to 67 from 65 will be worth 1 billion euros.
Kouvelis said, however, there was no final agreement on any measures. A new meeting of the coalition party leaders will be held next week, he said.
With his New Democracy party holding 128 of the Greek Parliament’s 300 seats, Samaras relies on Pasok’s 33 seats and the Democratic Left’s 17 to secure parliamentary approval of any pledge made to international lenders.
Agreement from the troika is imperative to allow the release of a 31 billion-euro payment that is designed primarily to recapitalize the nation’s banks in a bid to boost liquidity in a cash-starved economy.
Venizelos called for a “total” package to be presented to parliament including a condition that underpins the formation of the coalition government: that austerity measures be spread over four years rather than two.
International lenders to Greece held back funds pledged under two rescue packages totaling 240 billion euros in the wake of elections in May and June, which derailed reforms, halted state-asset sales and stoked concerns about the nation’s future in the euro area.
The votes increased support for the opposition Syriza party, which has vowed to renege on all pledges made to the EU and IMF. Syriza would have a narrow lead over New Democracy if elections were held now, a Metron Analysis poll for Ependytis newspaper showed.
Syriza would get 27.7 percent of the votes compared with the 26.9 percent it got in June, according to the survey of 1,002 people. New Democracy would get 26.1 percent compared with 29.7 percent in the June vote, it showed.
More than 57 percent of those polled said the country shouldn’t keep to pledges made in exchange for the bailout as the policies have failed, compared with 40 percent who said it should stick to its commitments.
European leaders have told Samaras the country must show it is implementing commitments made earlier this year to secure a second rescue package before there can be any discussion on easing the terms of the program. As part of that second package, private sector investors agreed to take a 53.5 percent loss in the face value of their Greek bond holdings, reducing the country’s debt by about 100 billion euros, the largest debt restructuring in history.
German Finance Minister Wolfgang Schaeuble ruled out more financial help for Greece, saying the last bailout stretched international creditors to their limits.
Schaeuble told reporters in Berlin yesterday that he’s “convinced that we went to the limit of what’s economically justifiable with the second Greek program.” It was “very difficult” to put it together under existing rules and questioning it won’t instill confidence.
He said he doesn’t want to speculate whether Greece needs another reduction of its debt because that would unsettle financial markets. “The conditions for the payment of the next tranche are clearly defined,” Schaeuble said.