October 13, 2012 / 5:48 PM / 8 years ago

Greek PM sees austerity deal by October 18 summit

ATHENS (Reuters) - Greece expects to agree a new austerity package with its lenders and for the EU and IMF to bridge their differences on how to cut the country’s debt by the time EU leaders meet on October 18-19, Greek Prime Minister Antonis Samaras said.

Greek Prime Minister Antonis Samaras walks towards his office in Athens shortly after arriving in Greece October 5, 2012. REUTERS/Yorgos Karahalis

Greece is locked in talks with the European Union, European Central Bank and International Monetary Fund on a new set of spending cuts and reforms in exchange for the next tranche of loans saving the debt-crippled country from bankruptcy.

The talks have dragged on longer than expected, and Athens says it will run out of money by the end of November without the 31.5 billion euro ($40.85 billion) tranche.

In an interview with the Sunday edition of the Greek daily Kathimerini, Samaras said he expected a deal in time for the EU summit.

“By then, two things will have happened,” he said.

“First, we will have completed in full the agreement on the fiscal and structural prior actions for the disbursement; and second, Europe and the IMF will have most likely overcome their different estimates as to how the debt sustainability will be assured.”

With Greece mired in a five-year-long recession, the IMF has backed giving Athens two more years, until 2016, to hit its deficit reduction targets.

Euro zone paymaster Germany says it wants to wait for a report by officials from the EU/ECB/IMF “troika” before any decisions are taken.

The EU is also facing pressure, in part from the IMF, to restructure debts Athens owes the bloc, an uncomfortable prospect for some of Europe’s leaders, notably German Chancellor Angela Merkel for whom taking losses on the debt would be politically unpalatable with an election looming next September.

Two international bailouts since 2010 worth more than 200 billion euros are keeping the Greek economy afloat, but only in exchange for steep spending cuts and tax hikes that have driven the country deeper into recession and made the task of cutting debt even harder.

Plummeting living standards and soaring unemployment have seen Greeks take to the streets in sometimes violent protest.

The new package of spending cuts being negotiated, totaling almost 12 billion euros, includes a plan to raise the retirement age from 65 to 67 and to make it quicker and cheaper for employers to dismiss workers.

But a recession that has wiped out a fifth of Greece’s economic output since 2008, and which is forecast to continue for another two years, means Athens is already missing debt reduction targets agreed with its lenders.

In a report this week, the IMF said it expected Greek debt to peak at 182 percent of GDP next year and fall to 153 percent of GDP by 2017. Under the bailout plan, it is supposed to hit 120 percent by 2020.

($1 = 0.7712 euros)

Reporting by Harry Papachristou, Writing by Matt Robinson, editing by Diana Abdallah

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