- Associated Press - Thursday, June 23, 2011

ATHENS, GreeceGreece’s new finance minister was negotiating with the country’s international creditors Thursday over the finishing touches of a €28 billion ($41.6 billion) austerity package that must be passed by Parliament next week if the country is to receive crucial bailout funds.

Greece’s creditors, particularly its partners in the 17-country eurozone, are demanding Greek lawmakers back fresh budget cuts and taxes in the austerity bill and an additional implementation law by the end of June.

Only then will they approve the disbursement of the next batch of loans, worth €12 billion, from Greece’s €110 billion bailout, without which the country will default on its debts in mid-July.

A default by the country could drag down Greek and European banks, endanger the finances of other weak eurozone countries such as Portugal, Ireland and Spain, and potentially spark turmoil in global markets.

European officials are also discussing additional help for Greece in the form of a new bailout, as it has become increasingly clear the debt-ridden country will not be able to return to borrowing on international markets after the current rescue loans run out.

**FILE** A photo of Greek Prime Minister George Papandreou in clown paint hangs from mock gallows in front of the Parliament during a peaceful rally for a ninth consecutive day, attended by thousands called through a social networking site in Athens, on June 2, 2011. (Associated Press)
**FILE** A photo of Greek Prime Minister George Papandreou in clown paint ... more >

Even if it gets a second bailout, many economists think that Greece will have to restructure its debts in some shape or form in the coming years, especially if the economy shrinks further.

For now though, Evangelos Venizelos, who was appointed finance minister last week in a cabinet reshuffle following days of political turmoil, is meeting the heads of delegations from the European Commission, International Monetary Fund and European Central Bank, known as the troika, to discuss the final details to the two bills.

Greek media reports said they were tussling over changes to the measures which could lead to less savings than originally aimed for. But officials indicated there would not be significant changes.

“The terms of the midterm program remain the same as those outlined at the last meeting of the finance committee in parliament,” Deputy Finance Minister Pantelis Oikonomou told state NET television. “The troika sets the framework within which we move, but does not detail the actual measures.”

The midterm program is to be debated in Parliament on Monday and Tuesday, with a vote expected late Tuesday. The additional law comes up for discussion on Tuesday and must pass by June 30, the ministry said.

The renewed austerity drive, which will run to 2015, two years beyond the current government’s mandate, have led to repeated demonstrations and sometimes violent protests.

The country’s largest labor union called for a 48-hour general strike for June 28 and 29 to protest the bills and press demands for a change in policy by the country’s Socialist government.

The outline of the extra austerity measures were announced earlier this month, but certain key details — such as lowering thresholds for income tax, certain tax hikes on consumer goods and property — were left out and are expected to be announced later Thursday.

The talks in Athens come as Prime Minister George Papandreou, who survived a confidence vote in his government Tuesday, heads to Brussels for a summit of European Union leaders that will be dominated by the Greek crisis.

Papandreou still needs to convince several of his own Socialist lawmakers to support the austerity bill and the €50 billion privatization drive. At least one deputy, Alexandros Athanasiades, has vowed to vote against them due to objections about selling off state assets.

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