Greece to be granted fiscal adjustment extension

Greece will be granted an extension to its fiscal adjustment program by international creditors, after concluding a deal on a new spending cuts and reform package to clear the way for the disbursement of the next bailout tranche in coming weeks, Greek Finance Minister Yannis Stournaras said on Wednesday. "Today we won the extension," he said in an address to the Greek parliament, announcing that the government struck a final agreement with European Union/International Monetary Fund auditors on the 13.5 billion euro austerity and reform policies demanded before the release of the fresh 31.5 billion euro aid. Greece has been asking for a two-year extension to 2016 to ease heavy recession triggered by the first wave of cuts on salaries and tax hikes aiming to slash deficits and boost growth. "Without the extension, we would have to impose 18.5 billion euro worth measures instead of the 13.5 billion euro set we agreed on today," Stournaras told lawmakers, Greek national news agency AMNA reported. However, shortly earlier European officials had rejected media reports of such a deal for an extension of the Greek fiscal adjustment period. In regards to the austerity and reform package, Stournaras said it was sealed during a tele-conference on Wednesday and will be presented during the Euro Group Working Group on Friday. The package will be tabled to the Greek assembly next week-most probably in two separate draft bills, to give deputies the opportunity to vote separately on spending cuts and labor reforms. Stournaras said that Athens won some concessions from creditors on labor market reforms, a thorny issue in talks within coalition partners and EU/IMF representatives for weeks. According to the minister who urged the two junior center-left parties participating in the four-month coalition government to back the compromise deal, accepted their strong objections to some proposed policies regarding labor relations to boost competitiveness and growth. The lenders are said to have accepted a reduction of the dismissal notice period employers give to employees to four months (the initial proposal was three from the current six). EU/IMF inspectors are also said to have accepted the coalition partners' strong request that the level of compensation payment will not be dramatically reduced, so that the new measures will not deteriorate jobless and recession rates. Athens needs to have a package deal approved by the Greek parliament by November 12, when a new Euro Group meeting is due to decide on the release of the next tranche to the debt-wrecked country to avert a disorderly default and exit from the euro zone which could trigger a domino effect. Since 2010, under bailout agreements reached with international lenders, Greece depends on multi-billion euro rescue loans to stay afloat in exchange of tough austerity and reform measures. The country runs out of cash reserves on November 16, Greek Prime Minister Antonis Samaras warned last week after an EU summit in Brussels. However, some deputies of the coalition government have joined opposition parties in criticism against the fresh measures, warning that they will vote down the deal. The coalition which holds a 176 seat majority in the 300-member House has lost two MPs since Monday, and there are fears for more defections in coming hours. In a first reaction to the compromise agreement Stournaras announced, the Democratic Left, the moderate smaller party in the coalition which holds 16 seats in the assembly, opposed the final draft on the labor reform and is due to hold a meeting of its parliamentary group later on Wednesday. (1 euro=1.3 U.S. dollars)