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Greek PM on diplomatic offensive to decide nation's fate

20 August 2012, 21:37 CET
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Greek PM on diplomatic offensive to decide nation's fate

Antonis Samaras - Photo EC

(ATHENS) - Greek Prime Minister Antonis Samaras embarks on an uphill diplomatic battle this week to convince European partners to extend a deadline for major spending cuts to keep the floundering nation in the euro.

His bid to keep Greece in the 17-nation EU bloc starts Wednesday with meetings in Athens with Eurogroup chief Jean-Claude Juncker and European Commission head Jose Manuel Barroso.

Samaras, accompanied by his Finance Minister Yannis Stournaras, will then hold talks with German Chancellor Angela Merkel in Berlin on Friday and with French President Francois Hollande in Paris the day after.

The whirlwind diplomatic tour gives Samaras, who missed a previous opportunity to renegotiate the terms of Greece's bailout at a summit in June due to an eye infection, the chance to press the urgency of the Greek position.

Under the terms of the second bailout agreement struck with the EU and IMF earlier this year, Greece committed itself to further spending cuts and tax increases in exchange for a 100-billion-euro reduction in its debts.

The government has since been scrambling to find about 11.5 billion euros ($14.2 billion) to be implemented in 2013-2014, through drastic cuts and reforms.

Samaras is this week expected to sound out his European partners on spreading those cuts over four years, from 2013 through 2016, as Greece struggles through its fifth year of recession.

Whether or not Greece's creditors -- the so-called troika made up of the European Union, International Monetary Fund and the European Central Bank -- agree to extending the deadline for the cuts will likely depend on their audit of Greek finances that is to be conducted next month.

Their report will assess Greece's reform progress demanded to unlock the next slice of its bailout, worth some 31.5 billion euros.

Without the funds Greece's government is expected to quickly run out of cash and face the prospect of a default that many analysts believe would lead to it leaving the eurozone.

Hollande and Merkel will meet on Thursday where they are expected to discuss Greece, with France credited as being more flexible than German officials who have repeatedly said that Greece must meet its obligations to be able to stay in the eurozone.

Germany on Monday sought to lower expectations about the meeting, saying that no major decisions would be taken during Friday's talks with Samaras.

Merkel's spokesman Steffen Seibert said: "I can tell you what is not expected ... that strong positions will be laid out or significant decisions taken. That will not happen."

Samaras' coalition is trying to finalise before his meetings this week the plan for spending cuts. According to Greece's finance ministry, only 700 million of the 11.5 billion euros remains to be found.

The unpopular cuts are expected to come mostly from salaries, pensions and benefits.

With the spending cuts plan in hand, Samaras will be able to argue that Greece should get the two-year reprieve as the bailout agreement allows an extension to the programme in case of a deeper than expected recession.

Athens now predicts that its economy will contract 7 percent in 2012, significantly higher than the 4.5 percent forecast when the bailout deal was signed in March.

Greek officials have argued that making the cuts in two years will only cause a deeper recession and undermine the bailout's goal of stabilising the economy, but this may not stand up against wider concerns in the EU that the bloc will end up having to keep on refilling Greek coffers.

Analysts estimate the cost of an extension to be between 20 and 60 billion euros, but Greek officials have said they would be able to do it without further bailout funds from the EU.


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