Greece's lenders object to parts of its austerity plan

By Lefteris Papadimas

ATHENS | Sun Sep 9, 2012 4:24pm EDT

(Reuters) - Greece's foreign lenders have rejected parts of a nearly 12-billion-euro austerity package prepared by the government, Greek officials said on Sunday as the two sides resumed talks after a month-long hiatus.

The so-called "troika" of inspectors from the European Commission, the European Central Bank and the International Monetary Fund returned to Athens on Friday to conclude a report on Greece's progress in meeting the terms of its latest bailout.

The inspectors, who held talks with Greece's finance minister on Sunday, must approve the plan to trim roughly 11.7 billion euros from the state budget over the next two years if Athens is to get a green light for the bailout money it needs to avoid bankruptcy.

"The troika has not accepted all the measures, but we have alternative proposals," said Socialist leader Evangelos Venizelos, a junior partner in the ruling coalition who was briefed by the finance minister at a party leaders' meeting.

Greek Finance Minister Yannis Stournaras played down the inspectors' objections, saying they had rejected only a "few" measures. A senior Greek government official had said earlier that the troika had sought more details on the proposals to understand them better.

Officials declined to specify what the objections related to but a source familiar with the matter said they were over measures to save roughly 2 billion euros by cutting expenses in the public sector.

"A GOOD MEETING"

The IMF's mission chief to Greece, Paul Thomsen, told reporters as he left that the two sides had held a "good meeting".

The austerity package, which Prime Minister Antonis Samaras has yet to persuade his allies to sign off on, contains a new round of unpopular wage and pension cuts for the next two years that his coalition partners are loathe to be associated with.

The latest round of talks on Sunday between Samaras and his allies, Venizelos and Democratic Left chief Fotis Kouvelis, failed to get an agreement on the austerity package and the three sides said they would resume discussions on Wednesday.

The premier's allies have objected to across-the-board cuts on wages and pensions saying they want to shield poorer Greeks from further misery.

They also want a greater emphasis on measures to revive an economy languishing in its fifth year of recession. They deny that the fragile three-party coalition is at risk over the savings plan.

Thousands of Greeks demonstrated against the proposed cuts at a prominent annual trade fair on Saturday in the northern city of Thessaloniki, and more protests are expected in the coming days.

Athens argues it needs two more years to push through the austerity cuts because of a deepening recession, but the country's lenders - exasperated by broken promises of reform - have demanded the country first deliver on its pledges before seeking any concessions.

Greece faces bankruptcy and a potential euro zone exit without the next tranche of aid, an issue that European leaders are expected to decide on next month.

($1=0.7812 euros)

(Writing by Deepa Babington; Editing by Greg Mahlich and Andrew Osborn)