Greece, troika talks hit snag on labour reforms

ATHENS | Tue Oct 16, 2012 2:04pm EDT

(Reuters) - Greece's labor minister and international lenders briefly suspended talks on austerity cuts on Tuesday to confer with their leaders on the thorny issue of labor reforms, which raised objections among government coalition partners.

After weeks of tense negotiations on 11.5 billion euros of budget cuts in 2013-2014, the talks hit a fresh snag on the issues of scrapping automatic wage increases and reducing severance payments, part of labor market measures the lenders say are needed to make Greece more competitive.

"The troika demands feed recession and galloping unemployment," said Fotis Kouvelis, leader of the small Democratic Left party, after a meeting among the parties of the conservative-led government of Prime Minister Antonis Samaras.

The on-and-off talks on the austerity package, needed so Greece can secure a tranche from a 130 billion euro bailout keeping it afloat, have been frequently marred by tension and disagreement on issues ranging from wage cuts to public sector reforms.

Officials acknowledge the two sides remain at loggerheads over many issues but played down speculation that talks between the labor minister and the so-called troika of lenders from the European Commission, European Central Bank and International Monetary Fund had broken down.

"It's not a breakdown," a labor ministry official told Reuters earlier on Tuesday. "The prime minister as well as the other political leaders must be briefed on the progress of the negotiations."

After the leaders' meeting, talks with the troika resumed.

"This package must be the last one," said Evangelos Venizelos, leader of the socialist PASOK, the other junior partner in the ruling coalition. "We must conclude the measures but not haphazardly and not at any cost."

Greece needs to clinch an agreement on the cuts as well a long list of reforms before it can unlock aid. Samaras has said the country has money until the end of November.

(Reporting by Karolina Tagaris and Renee Maltezou; Editing by Pravin Char)