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Intense Greek talks for debt deal continue

By Nicholas Paphitis

Associated Press

Published: Monday, Feb. 6 2012 6:57 a.m. MST

Pedestrians walk next to a beggar in central Athens Monday, Feb. 6, 2012. Parties backing Greece's coalition government will hold a second day of emergency talks Monday on a vital austerity deal with rescue creditors, after an intense weekend of negotiations failed to produce a breakthrough needed to avert bankruptcy in March.

Petros Giannakouris, Associated Press

ATHENS, Greece — Greece's European partners tightened the screws on Athens on Monday, demanding that political leaders swiftly agree on more austerity measures in exchange for a new bailout package needed to avert a disastrous bankruptcy.

Angry unions, however, called a general strike for Tuesday to protest the demands for new, painful belt-tightening.

The Greek party leaders' meeting on Monday will follow up on intense weekend negotiations that failed to produce a breakthrough. Greece is negotiating both the austerity reforms to get a new bailout as well as a major writedown by banks and other private investors in their holdings of the country's bonds.

Patience has worn thin among Greece's European partners, after weeks of forecasts from Athens that a deal for both was imminent. European Commission spokesman Amadeu Altafaj Tardio said Greece is already "beyond the deadline" and should reach conclusions "around now." He added that "the ball is in the court of the Greek authorities."

Prime Minister Lucas Papademos will meet with negotiators from the eurozone and the International Monetary Fund on Monday afternoon and then with the leaders of the three parties backing his coalition.

The parties all publicly oppose steep cuts in private sector pay demanded by the eurozone and IMF, but their backing is needed for the government to reach a deal for the bailout, which must be approved by the Greek Parliament.

The new €130 billion ($171 billion) bailout deal is vital for Greece to avoid bankruptcy next month as it cannot cover a €14.5 billion ($19.1 billion) bond repayment due March 20 without the rescue funds.

The debt-crippled country has been kept solvent since May 2010 by payments from a €110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.

Its implementation depends on the austerity measures but also on separate talks with banks and other private bondholders to forgive €100 billion ($131.6 billion) in Greek debt, in exchange for a cash payment and new bonds worth 50 per cent less than the original face value, longer repayment terms and a cut in the interest rate to be paid on the bonds. Those close to the negotiations expect private investors to take an overall cut of up to 70 percent on the value of their bonds.

Over the weekend, Greek officials held a conference call with eurozone finance ministers, as well as more talks in Athens with EU-IMF debt inspectors, senior bank negotiators, and Greek political party leaders, to try and hammer out a deal on the new cutbacks.

Greeks have already been subjected to a spate of austerity measures in return for the rescue loans, suffering significant cuts in pensions and salaries coupled with repeated tax hikes and an increase in retirement ages.

Angry at the prospect of new pain after two years of harsh austerity, Greece's main GSEE labor union and the ADEDY civil servants' union called a new general strike for Tuesday.

"Together with the GSEE, we have just decided to hold a 24-hour strike tomorrow, to be accompanied by a protest march in central Athens," ADEDY secretary-general Ilias Iliopoulos told the AP.

An ADEDY statement said the proposed new cutbacks would "intensify the vicious cycle of recession and drive Greek society to despair."

Greece is in its fifth year of recession, while unemployment has hit record highs of about 19 percent.

"The current policy of austerity ... is turning workers into pariahs, jobless people and pensioners into paupers and deprives our youth of any hope," the statement said. "This policy has already pushed Greeks beyond their limits and must be stopped at any cost."

GSEE leader Yiannis Panagopoulos said the creditors' demands were a "chronicle of a death foretold."

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