Greek Party Leaders Weigh Spending Cuts

(Wall Street Journal) - Greece's three main party leaders were facing difficult decisions ahead of a key meeting Sunday as international creditors press for draconian reforms as a precondition to further aid.

A meeting with Prime Minister Lucas Papademos, initially set for Saturday, was pushed back a day in the hope that Greece would find common ground with the European Union and International Monetary Fund (IMF) on reforms needed to obtain a second bailout package.

However, key issues remain unresolved regarding creditor demands on private sector wage cuts and further budget spending cuts, according to Finance Minister Evangelos Venizelos, despite progress made on other fronts.

"The distance separating the successful completion of the procedure from a stalemate ... is very small. It is a very fine line. We are on a razor's edge," he told reporters Saturday.

Greece is holding twin sets of talks with its European partners and the IMF on a new bailout after they agreed to provide the country in late October with a second bailout worth €130 billion ($171 billion). At the same time, Athens is also negotiating a €100 billion debt write-down plan with its private-sector creditors.

Venizelos has been meeting with representatives of the so-called troika of creditors -- the European Union, IMF and European Central Bank -- on and off for the past two weeks to reach agreement over a series of new cutbacks, including slashing the minimum monthly salary in the private sector from €750 to around €550.

Greek government officials say the reduction in wages being sought by the troika will deepen the country's recession and widen its budget deficit by reducing tax revenue collections and contributions to its teetering pension funds.

Demands for additional austerity measures on the order of €2 billion to make up for missed budget targets last year are also being discussed, along with cuts to the country's public-sector workforce, and a mammoth bank recapitalization plan.

Among the spending cuts the troika is pushing for is a reduction of some €650 million in outlays for medicines paid for by national health insurance as well as another €400 million in defense spending, government officials said.

Faced with growing discontent over Greece's handling of the crisis, the three party bosses supporting Greece's interim government are very reluctant to sign off on the reforms seen as capable of sparking social upheaval.

Venizelos called on fast action from them, adding that talks must wind up by Sunday night. "We are at those points where political leaders must decide and commit," Venizelos said.

Georgios Karatzaferis, the leader of small nationalist party Laos, which forms the government along with the Socialists and conservatives New Democracy, said late Saturday he will not put up with any blackmail tactics from Greece's creditors.

"If something does not suit us and troika does not budge, we will not take the package," he said.

Read more: Wall Street Journal