05 February 2012

WSJ: Greece weighs spending cuts as bailout talks edge towards deal

Greece is moving closer towards a deal with international creditors on a second €130 billion bailout package, the country's finance minister said, but added that key differences holding up negotiations remain, and that political leaders still needed to sign off on tough decisions on spending cuts.

After a two-hour teleconference meeting with finance ministers from the 17 countries sharing the euro, Finance Minister Evangelos Venizelos said Greece has managed to narrow the scope of negotiations, which must wind up by Sunday. Outstanding issues will be decided by the leaders of the country's three political parties forming the interim government in a meeting with Prime Minister Lucas Papademos.

"The distance separating the successful completion of the procedure from a stalemate...is very small. It is a very fine line. We are on a razor's edge", Mr Venizelos told reporters.

Greece is holding twin sets of talks with its European partners and the International Monetary Fund on a new bailout, after they agreed to provide the country in late October with further financial assistance. At the same time, Athens is also negotiating a €100 billion debt write-down plan with its private sector creditors.

Demands for additional austerity measures on the order of €2 billion to make up for missed budget targets last year are also being discussed, along with cuts to the country's public sector work force, and a mammoth bank recapitalisation plan.

So far, the parties have agreed on how to provide Greek banks with a capital boost and on a state asset sale programme, the minister said. But differences blocking the bailout remain on ways to reduce labour costs and on measures needed to help the country meet its 2012 fiscal goals.

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