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updated: 8/22/2012 7:16 AM

Greece seeks more time; Juncker heads to Athens

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  • Pedestrians walk outside a pawn shop offering money for gold, in Athens.

    Pedestrians walk outside a pawn shop offering money for gold, in Athens.
    Associated Press

Associated Press

ATHENS, Greece -- Greece needs more time to implement tough financial reforms and spending cuts, Prime Minister Antonis Samaras says as he starts the first of a series of top-level European meetings to discuss his debt-ridden country's international bailout.

Jean-Claude Juncker, head of the Eurogroup, the body representing the finance ministers of the 17 countries that use the euro, travels to Athens Wednesday afternoon for talks with Samaras and his finance minister, Yannis Stournaras. The Greek premier then heads to Berlin later this week to meet with German Chancellor Angela Merkel and on to Paris to see French President Francois Hollande.

Greece is dependent on two international rescue loan packages from other eurozone countries and the International Monetary Fund, which are preventing it from bankruptcy and potentially having to leave the euro.

In return, it has had to impose strict austerity measures, including cuts to salaries and pensions and repeated tax hikes. But Athens has faltered in the speed and effectiveness with which it has implemented the reforms, fuelling impatience by its creditors, notably Germany, which is the single largest contributor to the bailout.

The so-called "troika" of debt inspectors that oversee Greece's bailout program -- the European Union, European Central Bank and the IMF -- are due in Athens next month to assess how well the country has stuck to the terms of the deal.

At stake is a massive (euro) 31.5 billion bailout installment, without which Greece faces a chaotic default on its vast debts and a possible exit from the euro. A Greek exit would destabilize markets and economies around the world as other vulnerable countries in the eurozone are caught up in investor panic over which would be the next country to fall.

Speaking to the popular German daily Bild, Samaras said that while Greece needs more time to restart its economy, this did not necessarily mean it needed more funds.

"Let me be very clear: we are not asking for extra money," Samaras was quoted as telling Bild. "We stand by our commitments and the implementation of all requirements. But we must encourage growth, because that reduces the financing gaps."

"All we want is a little `air to breathe' to get the economy going and increase state income," Samaras added, without specifying any timeframe. "More time does not automatically mean more money."

The troika inspectors will also examine Athens' proposals on how to make savings of about (euro) 11.5 billion (about $14.2 billion) in 2013 and 2014 -- spending cuts that the government is still working on. Stournaras said earlier this week that the package would be ready within the next two weeks, in time for the troika's visit.

Samaras' fragile three-party coalition government, which assumed the country's leadership in June after two inconclusive elections, has a delicate balancing act to pull off. Faced with widespread anger in Greece over harsh measures seen as unfair to ordinary people, it had pledged to seek to renegotiate some of the terms of the bailout. But its creditors have little patience left, with many officials across Europe insisting Greece should not get any more leeway.

"The government knows that its chances of convincing its international lenders, especially Germany, to extend the deadline for fiscal targets are slim, but it has to try given the domestic political scene, with the austerity-fatigued electorate expecting results on the renegotiation front and a strong anti-austerity opposition in parliament constantly attacking the government," said Martin Koehring of the Economist Intelligence Unit. "At the same time, the bail-out-fatigued international lenders want to see results on the austerity front in Greece.

"Hence, Greece remains trapped in a self-defeating cycle of ongoing austerity and economic depression that make it unlikely that Greece will be able to repay its debt unless there is major further debt relief from its international lenders," he said.

Greece's debt stands at more than (euro) 300 billion ($372 billion), and its economy is struggling through a fifth year of recession with unemployment above 23 percent. The country negotiated a writedown of its debt earlier this year which saw its creditors take a 75 percent cut in the value of their bonds and gave Greece a longer repayment time. Asked whether Greece needs a second debt writedown, Samaras replied: "that has never been discussed."

Some German politicians have talked openly in recent weeks about the possibility of Greece leaving the euro, and the vice chancellor, Economy Minister Philipp Roesler, has said that the idea of a Greek exit has "lost its horror."

There was some good news in the latest figures issued by the Finance Ministry, which showed the state budget deficit standing at (euro) 13.2 billion for the first seven months of the year, better than the deficit target of (euro) 14.8 billion.

Revenues continued to lag behind expectations, however, falling (euro) 2.8 billion short of the (euro) 30.4 billion targeted for January-July 2012 to come in at (euro) 27.6 billion.

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