Greece presses on with spending cut talks

Greek ruling coalition leaders pressed on Monday with talks on spending cuts needed to unlock a 31.5-billion-euro loan instalment from the country's EU-IMF rescue package. After two hours of talks with Prime Minister Antonis Samaras, his socialist and moderate leftist allies said they were working on a "strategic framework" to pull the country out of a five-year recession. "The discussion continues, and will continue in the coming days," said Fotis Kouvelis, head of the small Democratic Left party that supports the government. "We are in complete agreement on the strategic planning to deal with problems," he told reporters. Socialist leader Evangelos Venizelos, head of the coalition's third member, added: "We are creating a strategic framework to take the country out of recession. "All three leaders agree on this," he said. "The fiscal adjustment must take into account the fact that the recession is deeper than anticipated by our European peers," Venizelos said. Samaras met with his partners after initial talks last week failed to produce an agreement that Athens could present to international creditors. Greece is under pressure to identify 11.5 billion euros ($14.3 billion) in cuts under an EU-IMF deal finalised in February, a process delayed by elections in May and June. "We must finally be credible, we must settle this obligation which is pending from the previous administration," government spokesman Simos Kedikoglou told Antenna television. Additional cuts are expected to cause anger in a country still mired in a deep recession after two years of austerity, however. "We did not discuss cuts," Kouvelis said. According to reports, the savings will largely come from a cap on maximum pensions and cuts to health allowances and benefits. "We are seeking the perfect mix," said Finance Minister Yannis Stournaras. Proposed cuts are to be submitted to auditors from the European Union, International Monetary Fund and the European Central Bank whose report in September will determine Greece's continued access to loans. The conservative-led coalition government was formed in June with a pledge to renegotiate the multi-billion EU-IMF bailout and place more emphasis on growth. But Greece's European partners have warned that the country is in no position to demand concessions when its reforms are months behind schedule. Greek authorities must thus come up with decisions that "do not negate our country's ability to stay in the eurozone," said Stournaras. The international auditors would stay in Greece "as long as necessary," he added. Kedikoglou told Real FM radio: "These spending cuts are necessary to regain our country's credibility." As rumours of a Greek eurozone exit grew louder, Nobel prize-winning economist Robert Mundell told two Greek newspapers on Sunday that it was important for the country to remain in the eurozone. After ECB chief Mario Draghi said last week that the bank was ready to do "whatever it takes to preserve the euro," Mundell suggested that the ECB should issue its own bonds. Mundell warned last week that a euro exit would be disastrous for Greece, pushing the country's economy back 20-50 years.