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| Greece Official Says Deal Reached With Troika of Lenders | Greece Official Says Deal Reached With Troika of Lenders |
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| ATHENS — Greece has reached an agreement with its international lenders on a harsh new austerity package and a raft of controversial labor market reforms, the finance minister said Wednesday, a deal aimed at unlocking billions in new financial aid for the cash-strapped country and alleviating fears that Greece would leave the euro monetary union. | ATHENS — Greece has reached an agreement with its international lenders on a harsh new austerity package and a raft of controversial labor market reforms, the finance minister said Wednesday, a deal aimed at unlocking billions in new financial aid for the cash-strapped country and alleviating fears that Greece would leave the euro monetary union. |
| The finance minister, Yannis Stournaras, said Greece’s European partners had also agreed to grant Athens more time to implement the austerity package, around €13.5 billion, or $17.5 billion, of spending cuts and tax increases to soften the blow to Greece’s moribund economy, which is heading for its sixth straight year of recession. | The finance minister, Yannis Stournaras, said Greece’s European partners had also agreed to grant Athens more time to implement the austerity package, around €13.5 billion, or $17.5 billion, of spending cuts and tax increases to soften the blow to Greece’s moribund economy, which is heading for its sixth straight year of recession. |
| Earlier, however, Simon O’Connor, spokesman for the European economic affairs commissioner, Olli Rehn, rebuffed reports that a deal had been reached on the extension issue. | Earlier, however, Simon O’Connor, spokesman for the European economic affairs commissioner, Olli Rehn, rebuffed reports that a deal had been reached on the extension issue. |
| The package has fueled anger among Greeks, who are facing their third round of austerity in as many years, inspiring sometimes violent street protests here recently as a backlash against austerity is flaring across Southern Europe. | The package has fueled anger among Greeks, who are facing their third round of austerity in as many years, inspiring sometimes violent street protests here recently as a backlash against austerity is flaring across Southern Europe. |
| Still, getting Prime Minister Antonis Samaras’s three-party coalition government to approve the package remains an uphill battle. Some members of the small Democratic Left and the Socialist Pasok party are refusing to support wage and pension cuts, although they have pledged not to jeopardize Greece’s access to more financial aid. Meanwhile, the leader of the neofascist Golden Dawn party, which has ridden a tide of anger against immigrants and Greece’s worsening economy, recently threatened to have the party’s 18 parliamentary members resign en masse when a vote takes place, a move that would pose hurdles to approval. | Still, getting Prime Minister Antonis Samaras’s three-party coalition government to approve the package remains an uphill battle. Some members of the small Democratic Left and the Socialist Pasok party are refusing to support wage and pension cuts, although they have pledged not to jeopardize Greece’s access to more financial aid. Meanwhile, the leader of the neofascist Golden Dawn party, which has ridden a tide of anger against immigrants and Greece’s worsening economy, recently threatened to have the party’s 18 parliamentary members resign en masse when a vote takes place, a move that would pose hurdles to approval. |
| The measures need to be approved by Greek lawmakers before Nov. 12, when finance ministers from euro zone countries, scheduled to meet in Brussels, will consider how to provide Greece with the extra money it will require to allow the government to spread out the implementation of its austerity plan. | The measures need to be approved by Greek lawmakers before Nov. 12, when finance ministers from euro zone countries, scheduled to meet in Brussels, will consider how to provide Greece with the extra money it will require to allow the government to spread out the implementation of its austerity plan. |
| Should the measures pass, Greece’s so-called troika of lenders — the International Monetary Fund, the European Central Bank and the European Commission — will issue a report gauging whether Greece has made sufficient progress in mending its tattered finances to receive the €31.5 billion aid tranche that Mr. Stournaras has said is needed for Greece to avoid bankruptcy. | Should the measures pass, Greece’s so-called troika of lenders — the International Monetary Fund, the European Central Bank and the European Commission — will issue a report gauging whether Greece has made sufficient progress in mending its tattered finances to receive the €31.5 billion aid tranche that Mr. Stournaras has said is needed for Greece to avoid bankruptcy. |
| With state coffers virtually empty, an economy near depression and unemployment at a record high of 25 percent, Greece is counting on the money to keep the government running and to pay off a slice of more than €8 billion in arrears that it owes suppliers for basic products like medicines, which some companies have stopped supplying to Greece after the government failed to pay its bills. | With state coffers virtually empty, an economy near depression and unemployment at a record high of 25 percent, Greece is counting on the money to keep the government running and to pay off a slice of more than €8 billion in arrears that it owes suppliers for basic products like medicines, which some companies have stopped supplying to Greece after the government failed to pay its bills. |
| But most of the money will not go toward the economy. Instead, around 85 percent of the loan tranche will go to recapitalize Greece’s shaky banking system, whose capital reserves were depleted early this year when they lost huge amounts of money after the government reduced the value of its sovereign debt — held in spades by Greek banks — by around 50 percent. | But most of the money will not go toward the economy. Instead, around 85 percent of the loan tranche will go to recapitalize Greece’s shaky banking system, whose capital reserves were depleted early this year when they lost huge amounts of money after the government reduced the value of its sovereign debt — held in spades by Greek banks — by around 50 percent. |
| Mr. Samaras, the prime minister, has said the money would allow banks to start lending again, fueling growth at a time when the economy has contracted by 6.4 percent. But many people here are concerned that banks will simply hold onto the money rather than lend to businesses, continuing a trend that has already led tens of thousands of small and medium-size enterprises to fold in the past several years. | Mr. Samaras, the prime minister, has said the money would allow banks to start lending again, fueling growth at a time when the economy has contracted by 6.4 percent. But many people here are concerned that banks will simply hold onto the money rather than lend to businesses, continuing a trend that has already led tens of thousands of small and medium-size enterprises to fold in the past several years. |
| “I’m not confident that there will be a large portion of funds going into the market,” said Constantine Mihalos, president of the Athens Chamber of Commerce. “The vast majority of the funds will be filling gaps” in the banks accounts, he added, so “the liquidity crunch that has resulted in the death of even healthy companies will go on.” | “I’m not confident that there will be a large portion of funds going into the market,” said Constantine Mihalos, president of the Athens Chamber of Commerce. “The vast majority of the funds will be filling gaps” in the banks accounts, he added, so “the liquidity crunch that has resulted in the death of even healthy companies will go on.” |
| A draft version of the deal, compiled earlier this month and leaked to the media late Tuesday, included cutbacks in the public sector, where 5,000 civil servants will be placed on reduced wages before being either transferred to other jobs or dismissed. The same would happen to another 20,000 in 2013. | |
| The retirement age is to increase by two years, to 67 from 65, while certain categories of civil servants on “special salaries” will see their wages cut by as much as 35 percent. | |
| It also foresees a large reduction in the number of associate professors at state universities, to 2,000 from 15,226, and the abolition of the majority of tax exemptions. An emergency “solidarity” tax on income will be extended until 2018. | It also foresees a large reduction in the number of associate professors at state universities, to 2,000 from 15,226, and the abolition of the majority of tax exemptions. An emergency “solidarity” tax on income will be extended until 2018. |
| Mr. Stournaras, the finance minister, told Parliament that Greece wants to reduce its debt burden by lowering the interest and extending the maturities of its rescue loans. | Mr. Stournaras, the finance minister, told Parliament that Greece wants to reduce its debt burden by lowering the interest and extending the maturities of its rescue loans. |
| He said there were two approaches to a debt haircut. “The first way is to lower the nominal value but if you do that unilaterally no one will lend you money again. The second way, which yields the same result in terms of net present value, is lowering the interest and extending the repayment schedule,” he said, adding that this was “what we are asking for today.” | |
| Niki Kitsantonis contributed reporting. | Niki Kitsantonis contributed reporting. |
This article has been revised to reflect the following correction: | |
| Correction: October 24, 2012 | |
An earlier version of this article misstated the plan for changing the retirement age. It would change to 67 from 65, not to 65 from 67. |