UPDATE 1-Greece pushes for austerity deal as time runs short

Tue Oct 2, 2012 3:22pm EDT

By Renee Maltezou

Oct 2 (Reuters) - Greece held a new round of talks with foreign lenders to bridge differences over 2 billion euros of disputed austerity cuts on Tuesday, with time running short to clinch a deal before a meeting of euro zone ministers next week.

Athens has been haggling for weeks over 12 billion euros of cutbacks that its European Union and International Monetary Fund lenders have refused to sign off on over fears that some of the proposed savings are unlikely to materialise.

For the second day in a row, inspectors from the "troika" of European Commission, European Central Bank and IMF lenders had to face rows of angry Greeks heckling them as they entered a ministry building to start discussions.

At the labour ministry on Tuesday, dozens of disabled Greeks and their carers blocked the main entrance and chanted "We won't let it pass!" in protest at the cuts. One held a banner saying: "They handed 200 billion to bankers but cut down on medicine, treatment and benefits for the disabled."

The protests came a day after Greece unveiled an austerity budget that predicted a sixth year of recession in 2013 but failed to convince the troika, which has been sceptical of Athens' plans to cut health and defence spending.

"The troika is questioning the effectiveness of the measures related to structural reforms," a government official said, citing planned savings from restructuring entities in health and other ministries.

The official expressed optimism that a deal with the troika would be struck by the end of the week, but a second government source cast doubt on that, saying such an outcome now appeared "difficult".

Finance Minister Yannis Stournaras was non-commital on the issue. When asked by reporters, after a meeting with Prime Minister Antonis Samaras, whether an agreement with the troika could be reached before the EU Summit on October 18, he replied: "We'll see".

NO UNIFIED STANCE

Both sources said talks over the cuts were being further complicated by an internal rift between the EU and the IMF over how to solve the Greek crisis, as reported by Reuters last week.

The IMF wants Greece to cut its debt further to make up for going hugely off-track from the terms of its bailout, while Europe is resisting the option of a new debt restructuring and instead prefers to give Athens more time to get back on track, officials have told Reuters.

"If the troika doesn't have a unified stance, the negotiations become more difficult," the first official said.

Failure to get a deal by Monday will be another setback for Greece's efforts to quickly unlock its next installment of aid, without which the debt-laden country faces bankruptcy and the prospect of an exit from the euro zone.

Athens needs the troika's blessing on the austerity package as well as a positive review by inspectors on the country's progress in meeting the terms of its bailout to secure that aid.

But with European leaders scrambling to shore up bigger economies like Spain and Italy, analysts say Greece will eventually be handed enough aid to keep afloat to avoid throwing the bloc into further turmoil