Samaras Set for EU Talks on Austerity Measures

New Greek Prime Minister Antonis Samaras is set to visit EU leaders to discuss a proposed two-year extension in austerity cuts, amid hopes that an upcoming 11.5 billion-euro package of austerity measures will boost his case.

Samaras will meet Eurogroup chief Jean-Claude Juncker in Athens later this week and will then meet with German Chancellor Angela Merkel in Berlin at the end of the week. Most of the current proposed cuts are in pensions, salaries in public enterprises and welfare benefits, reports ekathimerini but it appears that privatisation of public sector enterprises is on hold as there has been no mention of it for some time.

Greece's economy contracted by 6.2 percent, and Samaras hopes to reduce the strain by renegotiating aspects of the bailout, the second version of which was 110 billion euros.

In Cyprus, there is a sense of the calm before the storm as the island waits for the next developments on negotiations with the Troika for its own bailout. Members of the ECB, IMF, European Commission Troika have visited the island twice so far as they assess the country's financing needs. The Troika reportedly wants a 15 percent cut on state employee salaries along with a 10 percent cut in pensions payouts.

Economic woes

State spending has risen to 74.6 percent of GDP, while a persistent recession whittles away at the populations' spending power and investment in new projects. The banking sector is beset by problems, including ever-rising numbers of investors claiming they have been cheated of their life savings after they bought into various high-yield bank securities schemes; and losses on their exposure to the Greek market.

The Troika is not in a hurry to conclude negotiations, which are set to wrap up by the beginning of September. A memorandum would be signed at an even later stage, after the procedure goes through various high-level EU meetings. But the government clearly needs money now. It is digging deep into semi-governmental organisations' pension funds to borrow short-term funds to for its payroll and maturing debt obligations, but even that resource is proving difficult to tap after the Electricity Authority of Cyprus (EAC) turned down its request for a 200 million euro loan.

Trade unions have reacted angrily against prospective pay and pensions cuts in the by-now familiar struggle to prevent austerity measures, a position shared by President Demetris Christofias, a long-term union man himself. But analysts point out that if there's not enough money to pay the high costs of the state sector, then cuts are inevitable until the economy recovers.

Message from CyprusNewsReport.com.  We can't do it without YOU. Please support our independence.

To make and read comments, become a full member of your news community, click here.