Greek leaders agree on new austerity - Gayo Lues

A government official confirmed on Thursday that a deal has been reached and at least two of the three parties that form Greece’s coalition government have agreed to it.

The deal came just ahead of talks in Brussels between finance ministers from the 17 eurozone countries.

Greek Prime Minister Lucas Papademos held talks for eight hours on Wednesday night with the leaders of the three parties in his coalition government, but negotiations stalled with no agreement on pension reforms.

However, following further negotiations government officials said they had found a way of plugging the 300 million euro shortfall by cutting defense spending and other expenditures.

The new EUR 130 billion bailout fund provided by the European Union, International Monetary Fund and European Central Bank, collectively known as the troika is vital for Greece to pay off a big bond redemption payment next month and avoid a messy default.

The international lenders demanded the country to come up with EUR 3.2 billion in spending cuts for 2012, by making cuts to private sector wages and pensions, public sector layoffs and cuts in health, pensions and defense spending.

On early Thursday before the deal was reached Greek unions promised a 48-hour strike to protest against austerity plans.

Greece has the highest debt burden in proportion to the size of its economy in the 17-nation eurozone. Greece unemployment is at 19.2 percent and the country has been in recession since 2009.

PG/JR