Greek PM hosts Eurogroup chief, begins lobbying effort

ATHENS Wed Aug 22, 2012 2:48am EDT

Greece's Prime Minister Antonis Samaras (C) leaves his office after a meeting with coalition party leaders in Athens August 1, 2012. REUTERS/Yorgos Karahalis

Greece's Prime Minister Antonis Samaras (C) leaves his office after a meeting with coalition party leaders in Athens August 1, 2012.

Credit: Reuters/Yorgos Karahalis

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ATHENS (Reuters) - Greek Prime Minister Antonis Samaras starts a European charm offensive on Wednesday with talks to persuade euro zone chief Jean-Claude Juncker that the debt-laden nation has the will to ram through unpopular reforms and deserves more time to do it.

With cash coffers running empty and renewed talk of a Greek euro zone exit without more aid, Samaras is under pressure to persuade European leaders that Greece has finally mustered the political courage to fulfill promises under its latest bailout.

Juncker, the most influential European policymaker to visit Athens since the conservative-led government took power in June, is expected to tell Samaras bluntly that Greece must carry out promised cuts and that little room for leeway exists.

That message is likely to be hammered home again to the Greek leader when he travels to Berlin on Friday to meet German Chancellor Angela Merkel and to Paris a day later for talks with French President Francois Hollande.

Samaras tried to ease fears, particularly strong in Germany, that Greece demands ever more money without delivering on its promises. "All we want is a bit of 'air to breathe' to get the economy running and to increase state income. More time does not automatically mean more money," he told Germany's Bild newspaper.

"Let me be very explicit: we demand no additional money. We stand by our commitments and by fulfilling all our requirements. We have to crank up growth because that decreases the financial gaps," he added.

Shortly after being elected, Samaras's government promised he would tour Europe to seek two more years to hit targets under Greece's 130-billion euro bailout from the European Union and International Monetary Fund.

But faced with the risk of a messy bankruptcy without further aid, the government has since toned down its rhetoric on the issue and now expects merely to broach the idea during talks this week rather than formally requesting it.

"We must first re-establish our relationship with European partners that has been seriously damaged," said a government official, who spoke on condition he not be identified. "This is most crucial. Talking about certain parameters then comes at a second stage."

European paymaster Germany, where patience over Greece has worn thin, has already said it will not soften its demands from the twice-bailed out country.

WRANGLING OVER CUTS

Key to restoring credibility will be Greece's attempt to push through 11.5 billion euros of cuts over the next two years as demanded under the bailout - which Samaras's administration has yet to fully piece together after weeks of wrangling.

Samaras and his moderate leftist and Socialist allies have broadly agreed on the measures, but the government is still struggling to nail down the final cuts amid howls of protest over plans to slash pensions and put civil servants in a so-called labor reserve before laying them off.

"We are trying to find the best possible mix and a fair distribution of pensions. We also have to protect those getting very low pensions," a finance ministry official said. "A second issue we continue to work on is the labor reserve."

Because salary and pension cuts will lead to lower tax revenues, the government will have to find 13.5 billion euros in nominal savings to achieve its 11.5 billion target, the official said. Parties have identified 10.8 billion in cuts so far.

The measures will be presented for approval to the "troika" of officials from the European Commission, European Central Bank and IMF due back in Athens early next month for a final verdict on whether to keep money flowing to Greece.

After his election victory in June averted fears of an imminent Greek euro zone exit, Samaras won a positive initial reception from European governments. A Reuters poll last week showed a growing number of economists now believe Greece will remain in the euro zone.

But the country is hugely off track from targets under its bailout and EU officials expect a further debt restructuring will be likely - with the cost falling on the ECB and euro zone governments.

Greece blames the slippage on a deeper than expected recession that is now in its fifth year and which Athens has likened to America's "Great Depression". Nearly one out of four Greeks are jobless, and thousands of businesses have shuttered since the sovereign debt crisis exploded in 2009. (Additional reporting by Lefteris Papadimas and Annika Breidthardt in Berlin; Editing by Peter Graff and David Stamp)

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