UPDATE 1-Political crisis, privatisation gap won't derail bailout-Greek PM

Sat Jun 22, 2013 12:54pm EDT

* Greece will have no problem in talks with lenders -Samaras

* New, reduced government "will be more coherent"

* Reshuffle and updated coalition agreement promised soon

By Angeliki Koutantou and Harry Papachristou

ATHENS, June 22 (Reuters) - Greece's recent government crisis and failure to meet privatisation targets will not derail an international bailout, Prime Minister Antonis Samaras said on Saturday.

Samaras's government saw its parliamentary majority sharply reduced on Friday after the small Democratic Left party left the ruling coalition to protest against an abrupt shutdown of the state broadcaster ERT.

Samaras told the newspaper To Vima that his new, two-party government with the Socialist PASOK party would be more coherent, adding that he expected no problems in talks with lenders who are inspecting Greece's austerity and economic reform programme.

"The government went through a rough patch over the last few days but it stood on its feet and continues with renewed determination and much better cooperation," To Vima quoted him as saying.

Samaras's conservative New Democracy party and PASOK together control only 153 of the 300 seats in parliament. A few independents may also back the government, and the Democratic Left has signalled it could support some reforms on a case-by-case basis to keep Greece in the euro.

Samaras and PASOK leader Evangelos Venizelos are expected to meet as soon as Sunday to update their coalition agreement and arrange a cabinet reshuffle. According to Greek media reports, Yannis Stournaras is expected to remain finance minister.

The new government will have to conclude talks with the so-called "troika" of international lenders - the European Union, the International Monetary Fund and the European Central Bank - who return to Athens later this month for a regular review of Greece's compliance with the terms of their bailout.

Athens will have to acknowledge that it is likely to miss its privatisation targets after its failure to sell off the natural gas company DEPA blew a 1 billion euro hole in the bailout plan, raising the prospect of fresh austerity measures to make up the shortfall. [ID: nL5N0EM1U5]

"I don't think there will be any problems (in the troika talks)," Samaras said in the interview, pointing to mid-year deficit figures that are below interim targets.

"We are beating the (bailout plan's) overall targets ... everybody agrees that in terms of fiscal adjustment we are ahead of targets. There are some partial problems with partial targets but these are addressed and will be dealt with," Samaras said.

Greece needs to plug a funding gap and clinch a positive review to allow the IMF to keep bankrolling the 240-billion-euro bailout.

In their updated coalition agreement, PASOK and Samaras's conservative New Democracy party are expected to reiterate their pledge to meet Greece's fiscal goals, while rejecting new austerity measures and agreeing to pushing the lenders gradually to allow tax cuts to help soften a deep, six-year-old recession.

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