Greece debt talks fail to reach full deal

By Nicholas Paphitis

Associated Press

Published: Thursday, Feb. 9 2012 12:00 a.m. MST

In this Wednesday Feb, 8, 2012 photo a man scavenges through rubbish in Athens. Greece's statistical authority says unemployment in the recession-bound country reached a record 20.9 percent in November, with more than a million people without a job. In the 15-24 age group, unemployment reached 48 percent.

Dimitri Messinis, Associated Press

Enlarge photo»

ATHENS, Greece — Greece's crucial €130 billion ($173 billion) bailout was in limbo Thursday, after political leaders failed to accept the entire batch of new austerity measures that are demanded by creditors but have fueled outrage in the recession-hit country.

After marathon meetings with party leaders and international debt inspectors that ended about 5 a.m. (0300GMT), Finance Minister Evangelos Venizelos headed to Brussels to meet his counterparts from the other 17 euro countries, hoping to rescue the agreement and stave off bankruptcy.

"It is up to the eurogroup to decide at the highest level if the conditions are in place to proceed with the second (bailout) program," said Amadeu Altafaj Tardio, a spokesman for the European Commission, one of the three institutions charged with negotiating the rescue conditions.

Also attending the meeting in Brussels will be Christine Lagarde, the head of the International Monetary Fund, as well as Mario Draghi, the president of the European Central Bank.

Resistance is huge in Greece to more austerity. The country has endured two years of vicious spending cuts, the economy is in its fifth year of recession and unemployment is at a record 21 percent rate. Angry union leaders announced a 48-hour general strike for Friday and Saturday.

The Athens talks stalled after leaders of the three parties backing Greece's coalition government approved sweeping new austerity measures but balked at demands to make €300 million ($398 million) in pension cuts and another €325 million ($431 million) in savings.

The sums are relatively small compared with the bailout package, but if Athens does not make up for it, it faces a potentially devastating default next month.

Venizelos issued a dramatic plea to the coalition leaders to swiftly resolve their differences, warning that Greece's "survival over the coming years" depends on the bailout and a related debt-relief agreement with private creditors.

"It will determine whether the country remains in the eurozone or whether its place in Europe will be endangered," said Venizelos. "There is no room for any other expediency: we must look Greeks in the eye, look at the national interest and the interest of our children."

Markets nevertheless seemed hopeful that a deal will eventually be reached, with analysts suggesting the political leaders wanted to show their resistance to the foreign demands ahead of general elections later this year.

The euro rose 0.2 percent, while Greece's main stock exchange was the Stoxx 50 index of leading European shares rose 0.1 percent.

Jacob Funk Kirkegaard, research fellow at the Peterson Institute for International Economics, said the lack of a full agreement during Wednesday's talks highlights the "certain amount of political theater involved here."

"The political leaders in Athens are campaigning," he said. "They need to be seen by the Greek population as fighting until the very last drop of blood. ... They are facing off against the Germans and IMF and the rest of the world."

The debt inspectors from the European Union, the European Central Bank and the International Monetary Fund — known as the troika — held talks for five hours through the night with Prime Minister Lucas Papademos, Venizelos and Labor Minister Giorgos Koutroumanis.

But they failed to resolve the latest sticking point: a demand for cuts in supplementary pensions worth about €300 million.

Athens will have to agree to that before a deal on the bailout can go ahead.

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