The leaders of the three political parties in Greece's ruling coalition have reached a tentative agreement on a new EUR 11.5 billion ($17.4 billion) package of spending cuts and tax increases demanded by international creditors in exchange for two major bailouts, the country's finance minister said Thursday.
"There is a basic agreement," Finance Minister Yannis Stournaras told reporters after a meeting between the three political leaders in Athens. Agreements are yet to be reached on some outstanding issues. He said Athens plans to ask its creditors "a four-year extension of the Greek fiscal adjustment program."
The Greek finance minister said the tentative agreement gave him "a basis for a stronger negotiation" on Monday with Greece's so-called troika of international lenders comprising the International Monetary Fund (IMF), European Union and the European Central bank.
The development followed days of intense negotiations on the issue between Greek Prime Minister Antonis Samaras, Fotis Kouvelis-- the leader of the Democratic Left, and socialist PASOK leader Evangelos Venizelos.
Samaras' New Democracy Party had secured the most number of seats in the June parliamentary elections, but not enough to form a government on its own. The current three-party conservative-socialist-leftist coalition gives the new government a strong parliamentary majority of 179 seats, crucial to its proper functioning.
Incidentally, the latest developments come a day after violent clashes had erupted between riot police and anti-austerity protests in Athens during a day-long general strike called to protest against the implementation of further government cost-cutting measures. Dozens were injured in the violence, including police personnel.
Greece is already struggling under previously enforced cost-cutting measures demanded by international creditors. Most Greeks believe any further austerity measures will add to the burden of the poor and push the country deeper into recession.
The country's economy has been mired in recession for last few years, and is not expected to recover anytime soon. The economy shrunk by 6.3 percent in the second quarter of this year, while the unemployment rate rose to a record 23.6 percent.
In March, Greece had pledged a series of economic reforms and spending cuts worth 11.5 billion euros for 2013 and 2014 in exchange for a joint 130 billion euros bailout from the troika of lenders. Troika representatives are expected in Athens next Monday for discussions to finalize the austerity conditions required for availing further bailout installments. The proposed austerity package will be placed before the Greek parliament only after its gets the approval of the lenders.
The troika is expected to submit its report on Greece at a Eurogroup meeting due October 8 in Luxembourg, which will decide on the disbursement of the next tranche. Greece needs this lump sum to recapitalize its cash-strapped banks and revive lending. However, the country has repeatedly fallen short of its reform pledges, triggering concerns among other eurozone member-states.
Athens is required to fulfill the bailout requirements for receiving the next installment of 31.5 billion euros from the 130 billion euros bailout. It is almost certain that a failure to secure the loan amount will leave Greece insolvent and ultimately force its exit from the eurozone.
Earlier, Athens had availed a joint EU-IMF 110-billion-euro rescue loan in May 2010, of which several tranches have been handed out to Athens.
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