Greek PM seeks backing for reforms, debt deal near

Sun Jan 29, 2012 2:33pm EST
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By George Georgiopoulos and Renee Maltezou

ATHENS (Reuters) - Prime Minister Lucas Papademos sought backing on Sunday from leading Greek party leaders for painful and unpopular reforms that the near-bankrupt country must negotiate now that a long-awaited debt relief deal seems almost secured.

Attention is shifting to negotiations with Greece's international lenders who want proof that the Papademos coalition will take action on reforms before they hand over funds from a 130 billion euro bailout.

Greece needs the money to avoid a chaotic default when big bond redemptions fall due in March. However, in a sign that the talks will be tough, German Economy Minister Philipp Roesler openly called for Athens to surrender control of its budget policy to outside institutions if it cannot implement the reforms required under the euro zone rescue package.

Such suggestions have raised hackles in Greece and Papademos made clear how hard the talks with its lenders, the IMF and European Union, would be.

"The negotiations are not easy," he said in a statement after meeting the heads of the three parties in his government.

"Despite progress on stabilizing the economy, despite the significant changes and the great sacrifices, deviations from targets and repeated delays in the implementation of specific policies have resulted in our partners setting more terms and commitments."

Greece appears to be close to clinching the bond swap agreement with private creditors after months of talks. This followed suggestions that the creditors are willing to accept a demand made by euro zone ministers for new bonds to carry annual interest of less than 4 percent.

If the deal is sealed, this will ease Greece's debt burden by slashing the value of the creditors' debt holdings and give Papademos a boost, but only briefly.   Continued...

<p>Conservative party leader Antonis Samaras leaves the Greek prime minister's office after a meeting in Athens January 29, 2012. Papademos met leaders of political parties in his coalition on Sunday to persuade them to back painful reforms demanded by the near-bankrupt country's foreign lenders. REUTERS/John Kolesidis</p>