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Greece warned: Revamp or no more bailout

Nov. 1, 2012 at 3:00 AM   |   Comments

BRUSSELS, Nov. 1 (UPI) -- Greece doesn't yet merit more bailout aid, so it must resolve its internal issues and back new cuts and taxes if it wants to avoid default, euro ministers said.

"We called on the Greek authorities to solve remaining issues so as to swiftly finalize the negotiations with the troika institutions," eurozone finance ministers said in a statement after a Eurogroup conference call.

Greek conservative Prime Minister Antonis Samaras said just the day before his Finance Ministry worked out last week a painful economic package with the lending "troika" of the International Monetary Fund, European Commission and European Central Bank.

The package of $17.5 billion in austerity measures and tax hikes was enough to satisfy the troika and get $41 billion in additional financial aid Finance Minister Yannis Stournaras has said Greece needs this month to avoid bankruptcy, Samaras said.

But left-wing lawmakers in his governing three-party coalition said they would not support the budget package if it includes easier layoff rules troika members demanded.

The proposed agreement -- which Samaras is expected to present to Parliament Monday and push through in an emergency vote Wednesday -- includes those rules, as well as immediate wage cuts for 5,000 government workers and cuts for another 20,000 in 2013 before all 25,000 are transferred to other jobs or dismissed.

It also raises the retirement age to 67 from 65, cuts the number of state university associate professors to 2,000 from 15,226 and ends most tax exemptions.

In addition, an emergency "solidarity" income tax would be extended until 2018.

The country's labor unions announced a 48-hour strike Wednesday when the parliamentary vote is expected to be held.

The Eurogroup finance ministers said any decision to release the next round of money "was subject to the completion of prior actions by the Greek authorities" -- a reference The New York Times said was to commitments Athens already made to overhaul labor laws and raise the retirement age.

While the finance ministers pressed Athens for harsh reforms, they also said they were considering the possibility of helping Greece by further lowering interest rates on Greece's bailout money or buying back Greek bonds at current depressed prices and then retiring them, the Financial Times reported.

They also considered striking a deal with the ECB not to take profits on the $71 billion in Greek bonds it holds, the Times said.

Officials said the eventual solution would likely be a combination.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs the Eurogroup -- which is what the finance ministers' meeting is called -- said he expected a deal to help Greece would be worked out before the eurozone finance ministers meet in person Nov. 12.

Officials said the deal could be worked out as early as next week.

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