Greece faces hour of decision on austerity, rescue

Greece reached the hour of decision on Wednesday over more budget cuts demanded by the EU and IMF and a debt deal to obtain a second rescue and close a key chapter in the eurozone crisis. A finalised plan on new Greek aid that was hammered out with the European Union and International Monetary Fund has been handed to partners in the governing coalition, a conservative party source said. Heads of the socialist, conservative and far-right parties are expected to approve the 50-page text at a meeting scheduled for about midday, the New Democratic (ND) party said. An agreement, just the day after a general strike against the new round of budget measures, would clear the way for a second rescue worth 130 billion euros ($173 billion) from the EU, European Central Bank (ECB) and IMF which is vital if Greece is to avert a debt default in March. The text was drawn up during a night of marathon talks between Prime Minister Lucas Papademos and representatives from the "troika" aimed at setting up a second rescue for Athens following an initial bailout worth 110 billion euros. The coalition party leaders were given a few hours to study the plan, which was said to include cost-saving measures worth 3.2 billion euros. The document "presents an outline of new measures" that official creditors have demanded in exchange for more aid for the massively-indebted eurozone member, the ND source said. An "agreement in principle" is now required from the three coalition parties after weeks of haggling over controversial new austerity measures, it added. The roadmap towards a resolution of Greece's perilous financial situation would then be presented for approval by parliament, something that might take place by the weekend. Press leaks have said that the latest measures, reportedly "tweaked up to the last minute," include a cut of around 20 percent in the minimum wage and cuts in complementary pension programmes. Around 15,000 Greek public sector jobs are also tipped to be eliminated. The country is running out of time to agree on new budget action, and to conclude a separate debt write-off with banks and other private creditors worth at least 100 billion euros. Greece has run up total debt of around 350 billion euros, roughly 160 percent of its gross domestic product, and the IMF has insisted that level be brought down to a maximum of 120 percent of GDP. A source at the prime minister's office said Wednesday that "a series of very technical points have taken longer to resolve than foreseen," but that there was no major snag in the talks. On Tuesday, Papademos also met Charles Dallara, head of the Institute of International Finance and chief representative in the private debt discussions. The Wall Street Journal reported on Wednesday that the ECB would participate in a writedown of Greece's debt by agreeing "to exchange the government bonds it purchased in the secondary market last year at a price below face value, provided the debt-restructuring talks have a successful outcome." According to the report, the ECB would forego interest payments on Greek bonds bought as part of a controversial programme launched in May 2010. Scuffles broke out Tuesday on a rainy Syntagma Square in central Athens where thousands of protesters vented their anger at the EU and IMF and at what they saw as a hard line spearheaded by Germany. A group of nationalist protesters burned a German flag and tried to set fire to one that showed the Nazi swastika, before riot police swooped in. Athens has come under intense pressure from EU leaders, with talk emerging again of a possible Greek exit from the eurozone. Such a development now would be less dangerous now than in early-2010 when the scale of the debt crisis first emerged, Dutch Prime Minister Mark Rutte told Netherlands public radio referring to the risk of contagion across the eurozone. "There is less risk now," Rutte told an increasingly eurosceptic Dutch audience, which along with Germans and others in the eurozone have balked at another Greek bailout. "It is in our interest that Greece remain, and to achieve that it must do all it has promised to do... but if that does not work out, then we are stronger now than a year and a half ago," Rutte noted. Greece must reimburse 14.5 billion euros in bonds due March 20, but without the debt writedown and new aid it could default, which could roil the 17-nation eurozone and undermine a global economic recovery. An EU diplomatic source suggested all was not lost and that eurozone finance ministers had been asked to be on standby to examine the latest developments, probably via teleconference, late on Wednesday or Thursday.