Greek coalition proposes easing bailout terms

Mark Lowen reports from Athens on what the new government wants to do in Greece

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'

Analysis

Greece's new government was elected by promising voters that it would renegotiate some terms of the country's bailout. The concessions that it hopes to obtain have now become clear and they go further than previously thought.

The package may go too far for Germany, whose chancellor, Angela Merkel, reiterated last week that Greece must stick to its cost-cutting path. She is mindful that German voters are frustrated with footing the bill for the Greek bailout.

Representatives of Greece's international lenders arrive here on Monday to assess what changes, if any, might be acceptable, with further discussions at an EU summit next week. Greece may be overplaying its hand now so as to win some concessions in a later compromise.

But if the tactic backfires, if the requests fall on deaf ears, the new government will face a swift backlash at home. And that would make its first few months in office even harder than expected.

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.

Greece's new Prime Minister Antonis Samaras (L), Finance Minister Vassilis Rapanos attend the first cabinet meeting at the Greek Parliament in Athens on June 21, 2012. 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.

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