Greek Coalition Sets Austerity Plan

The Wall Street Journal

By STELIOS BOURAS and PHILIP PANGALOS

ATHENS—Greece's three coalition partners Wednesday agreed on a basic outline of a plan regarding €11.5 billion euros ($14.1 billion) of spending cuts to be implemented over the next two years but have pushed back final decisions on the belt-tightening measures, pending discussions with international creditors.

After a three-hour meeting with Prime Minister Antonis Samaras and the two other party leaders in Greece's coalition government, Finance Minister Yannis Stournaras said talks on determining the cutbacks for the 2013 to 2014 period went well but specific policy decisions will be made "down the road."

"We agreed on everything in a general outline," he told reporters. "We did not discuss specifics but a basic framework."

Greece is scrambling to put together the savings plan ahead of a visit to Athens by representatives from its "troika" of lenders—the European Commission, the International Monetary Fund and the European Central Bank—on July 24.

The flurry of meetings is a race against the clock: the government's cash reserves could run out by the middle of next month and revenue collections in the first half of the year fell short of the required target. The next €31 billion tranche of aid from Greece's euro-zone partners and the IMF, if approved, isn't expected to be disbursed until September.

An austerity plan for Greece was scheduled to have been approved by lawmakers by the end of June, according to commitments made in exchange for the country's second €173 billion bailout, but was delayed when elections in May and June threw the country into political uncertainty.

The leader of the socialist Pasok party, Evangelos Venizelos, said the measures "will be finalized in the coming days after the first discussions we will have with the troika on these issues."

The three party heads, from the conservative New Democracy, socialist Pasok and small Democratic Left parties, have renewed their appointment to discuss the cutbacks for next week.

In a bid to cover a €3.1 billion bond redemption in late August, Greece is seeking a bridge loan from international creditors, according to government officials.

The coalition party leaders decided Wednesday against the introduction of any additional measures for 2012 despite the country looking likely to miss this year's budget deficit reduction target and coming under pressure for some euro-zone peers to take corrective steps.

"All the expected measures, and not new ones, will be implemented with the maximum amount of social awareness," said Mr. Venizelos, referring to €3 billion of measures that had been approved in March.

In a report on Monday, the IMF said that Greece's budget deficit will trend toward 1.5% to 2% of gross domestic product, compared with the 1% planned in the latest revised emergency loan program, if Greece doesn't adopt any further policy changes.

Write to Stelios Bouras at stelios.bouras@dowjones.com and Philip Pangalos at philip.pangalos@dowjones.com

Write to Stelios Bouras at stelios.bouras@dowjones.com