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Greek opposition party rejects new austerity plan

By Elena Becatoros

Associated Press

Published: Tuesday, May 24 2011 6:01 a.m. MDT

Greek Prime Minister George Papandreou, left, and opposition leader Antonis Samaras pose for a picture before holding talks about austerity measures, in Athens on Tuesday May 24, 2011. The EU is pressing Greece's Socialist government to bridge differences with the conservative opposition before eurozone countries considers granting Athens a second rescue package to cover funding needs in 2012. Papandreou on Monday chaired an emergency cabinet meeting to finalize plans for a massive privatization drive and another increase in taxes that is expected to trigger fresh protests. Greek borrowing rates shot to over 17 percent for 10-year-bonds, hitting a new record margin _ or spread _ over the benchmark German rate.

Petros Giannakouris, Associated Press

ATHENS, Greece — Greece's main opposition leader bluntly refused Monday to back new austerity measures designed to tackle the crippling debt crisis, despite the European Union's insistence for cross-party support.

Top EU finance officials have argued that Greece, which is struggling to meet the terms of a €110 billion ($154 billion) bailout and could need more help, needs all its political parties to back the debt-cutting plans to ensure they can be implemented with minimum disruption.

They have not said outright that receiving the next installment of the bailout, due in late June, depends on a cross-party agreement, but have stressed the importance of opposition support.

Prime Minister George Papandreou was meeting the heads of opposition parties to seek consensus, a day after Greece announced extra measures to shrink its budget deficit. Those include more than €6 billion ($8.4 billion) in savings for this year and an immediate start to a previously announced €50 billion privatization program.

The midterm austerity program will run to 2015, two years beyond the current government's mandate.

But Antonis Samaras, head of the main opposition conservative party who earlier this month called for a renegotiation of the bailout deal, argued the government's overall direction was wrong — although he said he did back certain aspects, such as privatizations.

"To this demonstrably mistaken recipe (of the bailout deal), I will not agree," Samaras said shortly after meeting with Papandreou.

Arguing that ever-increasing taxes were serving only to push the country deeper into recession and strangling the market, Samaras underlined his party's proposal for reducing taxes as a means of jump-starting the economy.

"The government lacks the courage to restart the economy and is not considering a renegotiation. It is repeating the same mistake, and exceeding the limits of the Greek economy and of our people," Samaras said. "We remain opposed."

Earlier this month, Jean-Claude Juncker, chairman of the group of 17 eurozone finance ministers, called for Greece to follow the example of Portugal, where the country's three largest parties endorsed a bailout deal.

And on Monday, Amadeu Altafaj Tadio, spokesman for the EU's Monetary Affairs Commissioner Olli Rehn, said it was "very important for us that the political groups in Greece set their disagreements aside, and clearly and umabiguously support in public the objectives and main policies of the economic policy and program for Greece."

Tardio said the EU was not seeking "a detailed agreement, but there should be a political agreement on the political nature of the program."

Papandreou's socialist government has faced an uphill struggle to meet the terms of the bailout from other EU countries that use the euro and the International Monetary Fund.

The country's finances are currently being reviewed by inspectors from the IMF, the European Central Bank and European Commission to determine whether Greece can receive the next batch of loans under the program, worth €12 billion ($16.8 billion).

Finance Minister George Papaconstantinou warned on Monday his country faces default unless it can secure the next installment, saying Greece would be unable to pay salaries and pensions without the funds. But he expressed confidence that the funds would be disbursed as planned, after the inspection visit.

Even with the loans, many analysts and European politicians are skeptical that the country can pull itself out of the debt crisis and reduce a budget deficit of 10.5 percent and debt of more than €340 billion ($476.68 billion) without some form of debt restructuring — paying lenders less than the full amount or later than originally scheduled.

Ratings agency Moody's said Tuesday that it would consider a restructuring of debt to be a default, and said such a move could affect other struggling European states.

"Moody's believes that a default is likely to have adverse credit rating implications for Greece, possibly some other stressed European sovereigns, and the Greek banks, regardless of the efforts made to achieve an "orderly" outcome. The full impact on Europe's capital markets would be hard to predict and harder still to control," the agency said.

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