Greek leaders face crunch talks as unions strike

… I honestly can't understand how additional days will help…

(Reuters) - Greek leaders face crunch talks on Tuesday to secure a new international bailout and avoid a chaotic debt default, caught between EU demands that they accept painful reforms now and a national strike against more austerity.

Prime Minister Lucas Papademos negotiated through most of the night with Greece's European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when the 24-hour strike was about to begin, closing ports and tourist sites and disrupting public transport.

Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.

"We must find a solution today," said one government official before the leaders' talks, which are expected to start later in the day.

With Greece's future in the euro zone in question, German Chancellor Angela Merkel told Athens on Monday to make up its mind fast if it would accept the deal - and its conditions of reforms to make the economy more competitive that are certain to lead to big cuts in living standards.

Finance Minister Evanagelos Venizelos said talks with the "troika" of lenders - the European Commission, European Central Bank and IMF - were not going well.

"Unfortunately the negotiations are so tough that as soon as one chapter closes, another opens," he said after meeting troika officials on Monday night.

Early on Tuesday, the strike called by the private and public sector unions GSEE and ADEDY began to bite, bringing the country's main port to a standstill.

"No ships departed from Piraeus port this morning, as a result of the seamen's strike," said a coast guard official.

TOURISTS LOCKED OUT

In central Athens, tourists were locked out of the Acropolis and public transport was disrupted during the morning rush hour. State hospitals ran on a skeleton staff and teachers, bank employees and telecoms workers were due to join the action.

Greek party leaders face a general election possibly as early as April and have been reluctant to accept yet more austerity to be piled on top of a series of pay cuts, tax rises and job losses imposed since Greece's first bailout in 2010.

After weeks of argument a number major issues have yet to be sorted out at Tuesday's talks.

Greece has yet to identify spending cut measures worth 600 million euros this year, out of a total austerity package of about 3.3 billion euros, a government official said.

The troika was also demanding that private firms' labor costs be cut by about a fifth. This would be done by a combination of reducing the minimum wage by as much as 20 percent - a move that would drag the entire wage scale lower - by cutting holiday bonuses or by scrapping some industry-wide wage bargaining agreements.

Private sector workers currently receive holiday bonuses at Christmas, Easter and in the summer amounting to two months' pay in total, although such benefits have already been cut for public workers.

The troika also wanted top-up, supplementary pensions to be cut by about 15 percent on average to make the pension system financially viable, the official said.

Merkel - whose government funds much of the bailouts for Greece despite public hostility at home - expressed exasperation at the endless arguing in Athens.

"I honestly can't understand how additional days will help. Time is of the essence. A lot is at stake for the entire euro zone," she said in Paris.

Jean-Claude Juncker, who chairs the group of euro zone finance ministers, also backed a plan put forward by Merkel and French President Nicolas Sarkozy to set up a special escrow account into which Greece would make future interest payments as a means of guaranteeing that creditors were consistently paid.

However, Juncker denied that the euro was in danger because of the debt crisis. "The euro will outlive us all," he told German Inforadio on Tuesday.

EU officials say the full package must be agreed with Greece and approved by the troika before February 15 to allow time for complex legal procedures involved in the bond swap to be completed in time for a March 20 bond redemption.

In some euro zone countries, including Germany and Finland, parliamentary approval is required to raise the bailout money.

PATIENCE WEARING THIN

Greeks watched the political drama with the same exasperation they have shown throughout the nation's nearly three-year crisis, mixed with fear of the consequences of leaving the euro.

"We are lost either way but political leaders have to agree," said Kosmas Georgiou, a 31-year old company inspector. "Going back to the drachma is not an option, it's disaster."

"They are delaying this just to look like heroes."

Papademos said after five hours of talks on Sunday that leaders of the conservative, socialist and far-right parties in his coalition had agreed cuts and other reforms worth 1.5 percent of gross domestic product this year.

However, how exactly these cuts will be achieved has yet to be thrashed out, and every time a method is proposed, troika officials have to calculate whether this would achieve the savings they demand.

(Additional reporting by Karolina Tagaris, Tatiana Fragou and Harry Papachristou in Athens, and Gareth Jones in Berlin, and Writing by Deepa Babington and David Stamp; Editing by Elizabeth Piper)