* Euro zone officials agree new bailout in principle-source
* Private creditors may participate modestly in new scheme
* Leftists stage protest at Finance Ministry
* Papandreou to present mid-term budget plan to Juncker
(Adds finance ministry, report on funding figures)
By Lefteris Papadimas and George Georgiopoulos
ATHENS, June 3 Greece is set to impose a deeper
bout of austerity on its struggling economy and promise to speed
up a privatisation drive in return for a new international
bailout to avoid a debt default.
Prime Minister George Papandreou on Friday will present his
side of the deal, a medium-term budget plan, when he meets the
chairman of euro zone finance ministers -- the people who must
stump up much of the planned new funding along with the IMF.
In Athens leftists staged a protest at the finance ministry,
hanging a huge banner across the building to denounce policies
which they said would "turn workers into modern slaves".
Euro zone officials meeting in Vienna agreed in principle to
a new three-year programme for Greece to run until mid-2014, a
source close to the negotiations said late on Thursday.
This would effectively supersede a 110 billion euro rescue
Greece agreed with the European Union and IMF a year ago.
But whereas taxpayers have so far borne the brunt of
rescuing Greece and fellow euro zone members Ireland and
Portugal, the new deal would involve some participation of
private sector investors, the source told Reuters.
Some European politicians have argued that investors who
bought Greek government bonds will have to share that burden,
perhaps in the form of cutting the value of their debt.
The European Central Bank has fought such an idea, fearing
this could provoke a crisis among European banks which hold
large sums in Greek debt, and lead to a violent reaction on
financial markets far beyond Greek borders.
However, participation of private sector investors in the
new deal would be limited to avoid triggering a "credit event",
the source said, without providing any figures.
One scenario, the Greek newspaper Kathimerini reported, is
for the bailout to total 85 billion euros over three years up to
2014, with the EU and International Monetary Fund contributing
more than 30-40 billion euros.
"The rest will come from the private sector and
privatisation proceeds," Kathimerini said. The most likely
option is that private creditors, mainly banks, will be called
to swap their bonds with new ones maturing 10 to 15 years later.
"The aim is for the private sector's participation to be
voluntary and in a form that will not be considered a default."
Athens, which is struggling to lower its budget deficit, let
alone its 340 billion euro debt mountain, hasn't got a done deal
yet. Anything agreed by the officials in Vienna must be approved
by the euro zone finance ministers, some of whom represent
electorates which are hostile to any more aid to Greece.
Papandreou starts the offensive to win political approval
when he meets Eurogroup chairman Jean-Claude Juncker in
"The prime minister will present the main points of the
mid-term plan to Juncker, which include speedier privatisations
and new measures to cut government spending and raise revenues,"
a senior Greek government official said.
Greeks are already suffering under waves of austerity
imposed after Athens had to seek its first bailout from the
European Union and IMF a year ago.
Activists from the Communist-affiliated PAME group got into
the finance ministry, which stands on Syntagma Square where
protesters gather nightly to demonstrate against corruption and
"Organise and fight for an overthrow -- General Strike",
read a banner draped from the roof by PAME, which advocates
non-violent protest. The Greek flag remained flying from the
building but next to it, PAME banners had replaced the usual
circle of yellow stars on a blue background of the EU.
"We have a sacred duty to our children and ourselves to
cancel plans to turn workers into modern slaves," PAME said in a
statement. "We must not allow our children to work for hunger
wages. If we do not fight to overthrow these policies their
working future will be hell."
Greece's main public sector union, ADEDY, will join private
sector sister union GSEE in a nationwide strike on June 15.
The Greek government official said Athens had signed up to
6.4 billion euros ($9.23 billion) in new measures to cut its
2011 budget deficit and aimed to wrap up bailout talks with a
team of international inspectors by Friday.
(Additional reporting by Paul Taylor in Paris, Angeliki
Koutantou and Ingrid Melander in Athens; Writing by David Stamp,
editing by Patrick Graham)