Greece bailout: Athens urged to stick with reforms

Arcade of shops with "for sale" signs on their windows in Athens (22 August 20120)
Image caption Greece's long recession has led to soaring unemployment and poverty levels

The leaders of Germany and France have told Athens it should not expect leeway on its bailout agreement unless it sticks to tough reform targets.

German Chancellor Angela Merkel and French President Francois Hollande have met to discuss whether Greece should have more time to make spending cuts.

The pair are both meeting Greek Prime Minister Antonis Samaras this week.

He wants more time for Greece to complete reforms that are a condition of continuing to receive bailout loans.

The "troika" of donor bodies monitoring the bailout - the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission - are due in Athens next month.

Greece's continued access to the bailout packages depends on a favourable report from the trio.

"For me, it's important that we all stand by our commitments, and in particular await the [publication of] the troika report, to then see what the result is," Mrs Merkel said.

"But I will encourage Greece to follow the path of reform, which demands a lot of the Greek people."

And Mr Hollande said he hoped Greece would remain within the eurozone, but added that "of course Greece must make the necessary efforts for this to happen".

On Wednesday, eurozone chief Jean-Claude Juncker kept the door open for a change to the bailout terms after meeting Mr Samaras.

The economy of heavily-indebted Greece remains stuck in recession.

The country is currently trying to finalise a package of 11.5bn euros (£9.1bn: $14.4bn) of spending cuts over the next two years.

It is also being asked to put in place economic and structural reforms, including changes to the labour market and a renewed privatisation drive.

The measures are needed to qualify for the next 33.5bn-euro instalment of its second 130bn-euro bailout.

Greece needs the funds to make repayments on its debt burden. A default could result in the country leaving the euro.

'Tremendous efforts'

Mr Samaras is seeking an extension of up to two years for the painful steps, in order to provide Greece with the growth needed to improve its public finances.

In an interview published on Wednesday, he told Germany's biggest daily, Bild, that his country needed "a little breathing space" in order to kick-start growth and reduce its deficit.

After meeting Mr Samaras on Wednesday, Eurogroup head Jean-Claude Juncker said a decision on an extension would depend on the troika's report.

"We have to discuss the length of the period and other dimensions," Mr Juncker told a news conference, while sitting alongside Mr Samaras.

He said Greece was facing its "last chance" to make the necessary changes, but praised the "tremendous efforts" it has made so far to cut its deficit. He also stressed he was "totally opposed" to Greece leaving the euro.

Mr Samaras called the discussions "fruitful".

At least publicly, many EU leaders remain resolutely opposed to any moves to change the terms of Greece's bailout.

But Mr Juncker's remarks suggest there is room for manoeuvre and that an extension has not been ruled out, says the BBC's Stephen Evans in Berlin.

Mrs Merkel has said that she and Mr Samaras will not make any decisions on the issue in their talks on Friday. Mr Samaras goes on to meet Mr Hollande on Saturday.

On Wednesday, Mr Hollande also discussed Greece with British Prime Minister David Cameron in a telephone call.

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