Europe

Greek coalition proposes easing bailout terms

  • 23 June 2012
  • From the section Europe

Greece's new coalition government has proposed an extension to the deadline for it to reduce its budget deficit by at least two years, to 2016.

In a policy document, the government said its aim was for the fiscal target envisaged by the bailout deal to be met without further cuts to salaries and pensions.

Greece is under huge international pressure to fulfil bailout terms.

Polls last week ended a two-month deadlock over its implementation.

Pro-bailout parties gained a narrow majority in parliament, despite widespread public anger at austerity measures stipulated in the bailout.

Meanwhile Prime Minister Antonis Samaras is recovering after a successful eye operation on Saturday morning.

The routine surgery was to repair a damaged retina. Mr Samaras is expected to leave hospital on Sunday.

New Finance Minister Vassilis Rapanos is also in hospital after apparently fainting on Friday. His condition is said to be "stable and improving".

He was originally due to be sworn in on Saturday.

'Avoiding layoffs'

The document was published following agreement on policy goals between the coalition partners New Democracy, Pasok and Democraftic Left, and precedes a confidence vote in parliament.

It includes provision for "an extension to the period for the fiscal adjustment by at least two years, so that the fiscal target is met without further cuts in salaries and pensions".

"The aim is to avoid layoffs of permanent staff, but to economise a serious amount through non-salary operational costs and less bureaucracy," it said, quoted by AFP.

Under the current bailout deal, Greece has agreed to take 150,000 civil servants off the payroll by 2015.

Other provisions include:

  • reviewing minimum wage cuts and measures to facilitate private-sector layoffs
  • employers and unions to be allowed to set a private sector minimum wage
  • rearranging taxpayers' arrears for the year so that they do not exceed 25% of income
  • reducing VAT in catering from 23% to 13%
  • extending unemployment benefits

Greece's new cabinet was announced two days ago.

All three parties have signed a agreement to fully support the coalition, giving it a majority of 29 in parliament.

However, the cabinet is dominated by the conservative New Democracy party, after its left-wing partners Pasok and Democratic Left barred their MPs from joining.

Mr Samaras (L) and Mr Rapanos (R) are both in hospital

They are represented by two party officials each. It is believed that they may not want to be associated with austerity measures.

The BBC's Mark Lowen in Athens says the test for the new government will be to win significant concessions from eurozone partners in the weeks ahead.

Inspectors from the troika of the EU, European Central Bank and International Monetary Fund are due in Greece on Monday to review Greece's progress in meeting bailout conditions.

And on Thursday EU leaders will discuss the crisis at a two-day summit.

Eurozone officials say the bailout should only be revised to reflect the deeper recession, and delays to implementation caused by inconclusive elections in April and the subsequent failure to form a government.

The country got an initial EU-IMF package worth 110bn euros (£89bn; $138bn) in 2010, then a follow-up this year worth 130bn euros.

It has also had 107bn euros of debt, held by private investors, written off.