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Greece Struggles To Finalize Deal Over Spending Cuts

Greece Struggles To Finalize Deal Over Spending Cuts
9/21/2012 4:47 AM ET

Discussions between the Greece government and international creditors to fix a deal on EUR 11.5 billion spending reduction reached no clear conclusion late Thursday.

But some progress has been made on lifting the retirement age and pension cuts, which would together contribute a saving of EUR 9.5 billion. A final deal is crucial for Greece to receive a EUR 31.5 billion in aid.

Officials from the European Commission, the International Monetary Fund and the European Central Bank, collectively known as the troika, will leave Athens this weekend. The troika mission is set to come back next week again to finalize the terms if it is not resolved soon.

The troika will submit its report to the Eurogroup meeting to be held on October 8 in Luxembourg, which will decide the disbursement of the next tranche. Greece need this lumpsum to recapitalize its cash-strapped banks and revive lending.

More talks will be held between coalition partners of Greek Prime Minister Antonis Samaras government after they failed to agree on the budget reduction measures earlier on Thursday.

A finance ministry official reportedly said that around EUR 6.5 billion will come from reductions in salaries, pensions and bonuses and about EUR 1 billion from lifting the retirement age to 67 from 65.

The economy has been mired in recession for last few years, and is not expected to recover anytime soon. The Greek economy shrank by 6.3 percent in the second quarter, while the unemployment rate rose to a record 23.6 percent.

After staging an anti-austerity protest on Thursday, major unions plan to hold a 24-hour strike next week.

by RTT Staff Writer

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