Greece struggles on for deal on unpopular reforms

By Angeliki Koutantou and George Georgiopou

February 4, 2012 9:49 AM EST

Greece's government on Saturday struggled on in talks with lenders to secure a 130 billion euro ($171 bilion) bailout before turning to the trickier task of persuading political leaders to back the unpopular reforms involved in the rescue.

On the brink of bankruptcy, Athens must wrap up talks with foreign lenders on the bailout and get political approval for it soon to ensure funds begin flowing in time for the country to pay back 14.5 billion euros of bonds falling due in mid-March.

But negotiations with its 'troika' of international lenders have stumbled over their demands that include cutting labor costs by axing holiday bonuses and lowering the minimum wage - proposals strongly opposed by Greek political party leaders.

Athens failed to reach a deal with the European Union, European Central Bank and the International Monetary Fund in marathon negotiations that ended early on Saturday, with crucial issues still unresolved.

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"The troika is not backing down on wages, holiday bonuses and supplementary pensions," a Greek government official said after ministers met to discuss the reforms on Saturday.

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"None of these issues have been resolved. They are all open and the onus is on political leaders."

Finance Minister Evangelos Venizelos was due to continue talks with lenders on Saturday in a bid to clinch agreement before technocrat Prime Minister Lucas Papademos calls the socialist, conservative and far-right leaders in his coalition to seek their blessing.

That meeting of party chiefs, initially scheduled for Saturday, has now been put off until Sunday early afternoon, a government source said.

Euro zone finance ministers are also holding a conference call on Saturday to discuss Greece's rescue, Venizelos has said.

"There are issues to be resolved but we expect the negotiations to be concluded by tomorrow," a senior government official told Reuters on Saturday on condition of anonymity.

PROOF OF COMMITMENT

Increasingly frustrated with Athens' inability to enact the reforms needed to reshape the recession-hit Greek economy, foreign lenders have demanded proof of the country's commitment to spending cuts before doling out any more funds.

They want all the country's political chiefs - who are keen not to be linked directly with the painful reforms as they gear up for elections expected in April - to back the measures, irrespective of the outcome at the polls.

"Greek political leaders must offer their commitment to the program," said a source close to the lenders.

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