Greece struggles to get approval for bailout conditions

Greece acknowledged yesterday it was having trouble persuading its foreign lenders to accept a plan to save nearly €12bn over the next two years, essential to unlocking the aid payments the country needs in order to avoid bankruptcy.

Hopes that Greece, in its fifth year of recession, might get a quick green light on the package were dashed when inspectors rejected elements after bilateral talks resumed on Sunday.

There appeared to be little progress at a second round of talks yesterday between prime minister Antonis Samaras and the troika inspectors.

“It is a difficult discussion,” said finance minister Yannis Stournaras after the meeting. “We are trying to convince them on the soundness of our positions.”

Troika officials rejected some of the proposed measures to cut public sector expenses, and wanted a bolder plan to reduce the number of civil servants, a senior Greek official said.

“They insist on rejecting the measures that concern the restructuring of the state,” the official said. “We insist that they accept them.”

Slashing public sector jobs is a highly sensitive subject in Greece, where the constitution bars firing civil servants.

Athens’ proposed austerity package includes a controversial plan for a “labour reserve” in which civil servants get reduced pay before being laid off, but the scheme only targets savings of €167m over 2013 and 2014.

Mr Samaras will struggle to toughen the austerity package any further without running into stiff opposition from junior partners in his fragile three-party coalition, which has squabbled for weeks over proposed cuts.

The allies — under pressure from their voter base to water down the package — have warned troika officials against pushing austerity too far, saying that low-income pensioners and civil servants must be spared.

“Our European partners must realise that the Greek people can’t take it anymore,” said moderate leftist leader Fotis Kouvelis.

Hopes that Germany — the biggest contributor to European bailout as well as one of Greece’s harshest critics — might be prepared to cut Samaras some slack arose on Saturday.

German magazine Der Spiegel said chancellor Angela Merkel had reached the view that Greece must not be allowed to leave the eurozone and was prepared to let Athens’ bailout payments be front-loaded.

Greek industrial output dropped 5% year-on-year in July, with manufacturing slumping 7.8% as existing austerity measures stifled domestic demand.