ATHENS (Reuters) - Greece’s new national unity government submits a 2012 austerity budget to parliament on Friday, its first task in meeting the terms of the country’s bailout and avoiding bankruptcy.
Technocrat Prime Minister Lucas Papademos must get the rival parties in his coalition to cooperate in persuading Greece’s EU and IMF lenders to release a latest instalment of emergency financing it needs to avoid default next month, plus longer term funding later.
Inspectors from the “troika” of the International Monetary Fund, the European Union and the European Central Bank will start arriving in Athens on Friday for talks on releasing the 8 billion euro (6.8 billion pound) instalment, a troika source said.
One point of contention is sure to be a refusal by the leader of the conservative New Democracy party to sign a commitment to do whatever is needed to meet the terms of a 130 billion euro bailout agreed last month.
Greece’s lenders have said that without such written assurances by all the major political forces, they will release neither the latest instalment nor funding under the new bailout which Athens needs to stay afloat next year.
But New Democracy leader Antonis Samaras, whose party is in the coalition with the Socialists of fallen prime minister George Papandreou and the far-right LAOS party, has refused.
“I have repeatedly said I will not sign such statements,” he was quoted as saying by magazine Epikera in an interview.
Samaras also said he needed to win a parliamentary majority in early elections next year to reverse the austerity measures he disagrees with.
The coalition government faces public anger over measures that have already slashed wages and caused huge job losses, keeping the country in a fourth year of recession and driving unemployment to a record 18 percent.
The anger was evident on Thursday, when tens of thousands of Greeks took to the streets on the anniversary of a 1973 student uprising against the then-military junta. The uprising was crushed violently but it eventually helped to fell the regime.
The cabinet is expected to approve the budget on Friday with changes from earlier drafts before sending it to parliament, where it will proceed through committees for a vote by the whole chamber, which may not come until next week or later.
A draft approved by the previous cabinet last month foresaw a deficit of 8.5 percent of gross domestic product (GDP) for 2011, well above an earlier 7.6 percent target.
Finance Minister Evangelos Venizelos said last week the 2011 shortfall would be closer to 9 percent, moving the reference for next year and potentially putting a 14.6 billion euro target - an estimated 6.8 percent of GDP - at risk.
The draft also saw the economy shrinking 2.5 percent next year, a fifth year of contraction, but an estimate released by the European Commission this week projected a 2.8 percent fall.
Greece’s main aim in 2012 is to achieve a primary budget surplus - with revenues exceeding spending when debt maintenance costs are excluded - so it can start digging itself out from under a debt load that exceeds 30,000 euros for every citizen.
To do that, Papademos’s government must begin fighting rampant tax evasion, start privatisations and shrink the public sector - all reforms planned but ineffectively executed by Papandreou.
“We need to rescue our country, we need to rectify our country, we need to bring back our country’s integrity,” Venizelos said on Thursday. “We need to give Greek people, once again, the right to be optimistic and to hope.”
In another key part of the bailout plan, Greece has begun talks with private sector bondholders on a bond swap which aims to halve the debt Greece owes to them, the Finance Ministry said. It said it expected to present a proposal to the private bondholders by the end of November.
editing by David Stamp