Greece's Leaders Agree on Austerity Terms of Bailout Deal

According to two government sources, Greek political leaders have reportedly come to an agreement on the austerity measures being demanded by the troika of the EU/ECB/IMF. The additional austerity demands were imposed on Greece by the troika as a prerequisite for obtaining the bailout loans needed to keep the country afloat.

"Yes, there is a deal," one government official said.

Recall that Greece's unity government had agreed to the majority of the troika's demands but that pension reform had been the final sticking point. Up until the agreement between the leading parties in Greece, the country had been searching for ways to eliminate a €300 million shortfall in its budget targets.

Given the political difficulty with approving such sweeping measures in front of elections in Greece this year, reports indicated that Athens had been given 15 more days to complete a deal.

Details of where the additional budget cuts have come from have not yet been released.

The FT reported Thursday that conservative party leader Antonis Samaras had been vocal about his objections to cuts in supplementary state pensions. The FT says Samaras continued to balk at signing a "letter of assurance" that would commit Greek leaders to adhere to the terms of the bailout package. Samaras is a leading candidate for the office of prime minister.

Outside of pension reform, all of the other issues surrounding the bailout agreement had been settled. The highlights of the draft agreement that have been leaked to the press include Greece’s promise to a combination of spending cuts and tax increases totaling €13 billion between 2012 and 2015. The draft also gives Greece an additional year (until 2015) to produce a budget surplus of €4.5 billion. In addition, the minimum wage will be reduced by 22%. Apparently plans to eliminate holiday bonuses to private sector workers have been scrapped.

The ongoing negotiations amongst Greece’s party leaders have been occurring amidst violent protests by Greek’s citizens. Greece's two major labor unions are reportedly planning a new 48-hour strike on Friday and Saturday to protest the latest package of austerity measures.

Reuters reports that civil servants' union represents about 2M workers, which is roughly half of Greece's workforce. The WSJ also pointed out that latest austerity measures are likely to face resistance among lawmakers. The Journal article pointed out that two socialist lawmakers have signaled that they would vote against the reforms. Recall that parliament may vote on some or all of the bailout agreement this Sunday.

 

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