Greek PM seeks "breathing space" as talks begin

ATHENS Wed Aug 22, 2012 11:18am EDT

Greek Prime Minister Antonis Samaras addresses a parliamentary group of his party in Athens July 24, 2012. REUTERS/John Kolesidis

Greek Prime Minister Antonis Samaras addresses a parliamentary group of his party in Athens July 24, 2012.

Credit: Reuters/John Kolesidis

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ATHENS (Reuters) - Greece's Prime Minister Antonis Samaras started a European charm offensive on Wednesday with an appeal to Germans for more time to meet targets for deficit cuts, but may struggle to make his case in meetings this week with EU leaders.

"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," Samaras told Germany's mass-market Bild newspaper, which often mocks Greece's dire finances.

"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," Samaras added in the interview, which ran hours before he begins talks in Athens with euro zone chief Jean-Claude Juncker.

Appointed in June after two tumultuous parliamentary elections, Samaras hopes to persuade Luxembourg premier Juncker that the debt-laden Greek nation has the will to ram through unpopular reforms and deserves more time to do it, without being cut off from European rescue loans.

With cash coffers running empty and renewed talk of a Greek euro zone exit without more aid, Samaras is under pressure to convince European leaders that Greece has finally mustered the political courage to make good on commitments in a bailout.

Juncker, the most influential European policymaker to visit Athens since the conservative-led government took power on June 20, is expected to tell Samaras bluntly that Greece must carry out promised cuts and that little room for leeway exists.

In response to Samaras's comments to Bild, the Dutch finance minister gave a taste of the skepticism among the euro zone's less-indebted northern states towards Greece: "If it concerns delaying reforms and budget cuts, then it is not a good idea," Jan Kees de Jager told reporters.

Such messages are 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.

Merkel has already said she and Samaras will not make any decisions during their talks, adding she would wait for a report from lenders on Greece's progress in meeting targets. That report is not expected until late September.

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 a lack of European appetite for cutting Greece more slack, 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 Greek government official, who declined to be identified. "This is most crucial. Talking about certain parameters then comes at a second stage."

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 allies have broadly agreed on the measures, but the government is 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," a finance ministry official said.

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 before a verdict in October 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, relieved that firebrand leftist leader Alexis Tsipras failed to assume power.

Tsipras's SYRIZA party, which campaigned on a pledge to abandon the terms of the bailout keeping Greece afloat, said Juncker had turned down a request to meet its young leader.

SYRIZA lawmaker Dimitris Papadimoulis called the snub "a massive institutional discourtesy and an insult".

"I have the feeling that the leaders of the European Union and the euro zone prefer to talk with those who agree with them, or those they consider convenient," he told Skai television. "Mr. Juncker needs to give an explanation, because from what I see, tomorrow he is free all morning."

Juncker's schedule includes a visit to the Acropolis Museum later on Wednesday, where Samaras hosts a dinner in his honor.

With power firmly in the hands of Samaras's pro-bailout coalition and SYRIZA relegated to the opposition, a Reuters poll last week showed a rising 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 in Athens, Andreas Rinke in Chisinau and Annika Breidthardt in Berlin; Editing by Peter Graff and Alastair Macdonald)

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