Greeks promised no more austerity in 2012

Published July 18, 2012

| Associated Press

Greeks will be spared new austerity measures this year, parties backing the coalition government promised on Wednesday, though they refused to rule out more painful cuts starting in 2013.

Leaders of three parties met to try and hammer out details of a new round of cuts worth euro11.5 billion ($14.1 billion) demanded by international rescue creditors over the years 2013 and 2014. They also sought new measures to meet this year's deficit-cutting targets, which are slipping away.

Conservative Prime Minister Antonis Samaras met with leaders of the Socialist party and small Democratic Left party after five days of Cabinet-level talks failed to produce sufficient cuts.

When Samaras won the June 17 election, ending months of political uncertainty, he promised to renegotiate the country's bailout terms, which include tough deficit-cutting measures. But he could be forced to eventually slash public benefits further to help cover the euro11.5 billion in budget savings.

The party leaders promised to give weary Greeks a break, however.

"We decided that there will be no new (austerity) measures in the year 2012," Democratic left leader Fotis Kouvelis said after the meeting, though Finance Minister Yannis Stournaras refused to rule out more budget cuts next year.

Kouvelis said the government's financial plans will be completed in coming days.

"There will be a comprehensive proposal to request a renegotiation" of the country's bailout terms, he said. Greece would ask for more time to meet its deficit targets.

Debt inspectors from the European Union, European Central Bank and International Monetary Fund -- known as the troika -- are due to return to Athens next week.

In Germany, the country's Finance Minister Wolfgang Schaeuble said European rescue creditors would await the troika's report on Greece before taking any decisions.

"(For Greece) serious and far-reaching adjustment measures are needed in many areas," he told the German newspaper Rheinische Post, in an interview published Wednesday.

Debt-strapped Greece has seen a rapid rise in poverty and unemployment since the start of the crisis in late 2009 and is stuck in a fifth year of recession as it survives on billions of euros in emergency loans from the IMF and other Eurozone countries.

In a report this week, the IMF warned that Greece's program to make its national debts and deficit sustainable remain at risk of failing.

"The recent deterioration in the political and economic climate in Greece serves as a warning about the potential onset of `adjustment fatigue,' which remains a threat to continued program implementation," the report said. "The situation in Greece remains fluid."

A deepening in the recession and uneven success in reforming the economy have hurt government revenues this year, the IMF noted.

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