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Greek leaders' austerity summit stalled
Greek leaders' meeting on new austerity measures postponed to Wednesday
By The Associated Press

ATHENS (AP) ' The Greek prime minister's office says a meeting of coalition party leaders has been postponed until Wednesday.

The meeting was originally scheduled for Tuesday evening and had already been postponed several times.

Prime Minister Lucas Papademos will be meeting instead with representatives of the European Union and the International Monetary Fund later Tuesday, a spokeswoman said. She spoke on customary condition of anonymity.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

ATHENS, Greece (AP) ' Pressure from home and abroad is intensifying on Greece's political leaders as they prepare to meet Tuesday to decide on harsh cutbacks to secure a euro130 billion ($170 billion) bailout and avoid a potentially disastrous default.

Heads of the three parties backing the interim government will confer with Prime Minister Lucas Papademos on new salary cuts and job losses, which other countries that also use the euro and the International Monetary Fund want in exchange for keeping vital rescue loans flowing.

The party leaders will meet as another round of strikes and protests brought the country to a standstill Tuesday. A general strike against the impending cutbacks stopped train and ferry services, while many schools and banks were closed and state hospitals worked on skeleton staff.

Riot police fired tear gas to repel hundreds of anti-austerity protesters who burned a German flag and tried to break a cordon outside Parliament, chanting "Nazis out!".

Ahead of tonight's meeting, the Greek coalition parties were to be handed a draft agreement of the austerity deal, a senior government official and a ranking coalition party member told the Associated Press, but gave no further details.

"The document will be given to political party leaders in the afternoon, it isn't yet finalized, it's still being drafted," the government official said.

They asked not to be named, citing the sensitive nature of the negotiations.

Athens must placate its creditors to clinch a euro130 billion ($170 billion) bailout deal from the eurozone and the IMF and avoid a March default on its bond repayments.

On Monday, Papademos' government caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, out of a total 750,000. The decision breaks a major taboo, as state jobs had been protected for more than a century to prevent political purges by governments seeking to appoint their supporters.

Among the measures the European Union and IMF are pressing Greece for is a cut in the euro750 ($979) monthly minimum wage to help boost competitiveness. This reduction would have a knock-on effect in the private sector ' because private companies base their salaries on the minimum wage ' and even unemployment benefits.

Greece's coalition party leaders held a first key meeting on the austerity measures on Sunday, and postponed a second round of talks by a day so Papademos could complete negotiations with EU-IMF debt inspectors that ended early Tuesday.

The leaders have already agreed to cut 2012 spending by 1.5 percent of gross domestic product ' about euro3.3 billion ($4.3 billion) ' improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them. The details remain to be worked out.

Creditors are also demanding spending cuts in defense, health and social security.

Unions and employers' federations alike have deplored the measures as unfair and unnecessary. Police said Tuesday that some 10,000 people took part in an otherwise peaceful union-organized march against the austerity program. A separate demonstration by about 10,000 Communist unionists ended without incident.

"They are committing a crime against the country. They are driving wage-earners into poverty and wiping out pensioners and the unemployed," said Vangelis Moutafis, a senior member of Greece's largest union, the GSEE.

"They are selling off state assets for nothing. This cannot continue. This crime must be stopped, right now."

The European Trade Union Confederation described the proposed new cutbacks as "simply not defensible."

"Greek workers and citizens have been pushed to the limit of what is acceptable in terms of restrictions," ETUC General Secretary Bernadette Segol said. "Labor law is being flouted and men and women are being crushed in the process."

Greece has been kept solvent since May 2010 by payments from a euro110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.

As well as the austerity measures, the bailout also depends on separate talks with banks and other private bondholders to forgive euro100 billion ($131.6 billion) in Greek debt. The private investors have been locked in negotiations over swapping their current bonds for a cash payment and new bonds worth 50 percent less than the original face value, with longer repayment terms and a lower interest rate.

Papademos will have a new meeting with banker Charles Dallara, who represents private bondholders in the negotiations, on Tuesday evening, the Prime Minister's office said.

Greek officials estimate private investors will take losses of about 70 percent on the value of their bonds. Greek lenders and pension funds hold some 34 percent of the country's privately owned debt.

The EU-IMF bailout will also give the Athens euro40 billion ($52 billion) to buy shares in the Greek banks, thereby protecting them from immediate collapse.

However, the bailout has to be secured for the deal with private investors to go ahead, as about euro30 billion from the bailout will be used to pay investors in the bond swap deal.

A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal.

But on Tuesday, the EU commissioner Neelie Kroes, in charge of the bloc's digital policies, said Greece's exit wouldn't be a disaster.

Kroes told Dutch newspaper De Volkskrant that "It's always said: if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true."

She said Greece's austerity drive so far left much to be desired.

"This is why the troika (IMF, EU and European Central Bank) is back in Greece again, reporting for the umpteenth time that Greece is not living up to its promises: too few savings, too few reforms," Kroes said. "It's becoming a Greek mantra: 'We cannot. We won't'!"

EU Commission President Jose Manuel Barroso quickly stepped in to counter the remarks.

"We are in a very decisive moment regarding the future of Greece and the future of the euro. We want Greece in the euro," he said.

"The costs of a default by Greece, the costs of a potential exit of Greece from the euro would be a lot higher than the costs of continuing to support Greece."

Greek Finance Minister Evangelos Venizelos acknowledged the demands on his country were tough, but on Monday called on coalition parties to work more closely together.

"To save Greece ... will involve a huge social cost and sacrifices," Venizelos said. "On the other hand, if the negotiations fail, bankruptcy will lead to even greater sacrifices."

In exchange for the first rescue loans, Greece has already imposed a raft of austerity measures meant to contain bloated budget deficits after years of profligate government spending. Pension and salary cuts were followed by increased retirement ages and drastically higher taxation ' including a deeply resented new property tax that punishes nonpaying households by cutting off their electricity supply.

Even then, the 2011 budget deficit is set to exceed targets, while tax revenues are constantly lagging as Greek authorities have made little headway in fighting rampant tax evasion and inefficient tax collection.


Derek Gatopoulos in Athens, Costas Kantouris in Thessaloniki and Gabriele Steinhauser in Brussels contributed to this report.

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