New York Times
February 5, 2012
Pushed against the wall by its foreign lenders, the Greek government agreed on Sunday to drastic new spending cuts but failed to complete an arrangement that would unlock the financing the country needs to prevent default. It agreed instead to resume talks on Monday.
In a statement issued Sunday evening after a five-hour meeting, interim Prime Minister Lucas Papademos said that he and the leaders of the three parties in his unity government had agreed to cut spending this year by 1.5 percent of Greece’s gross domestic product in order to meet the demands of foreign lenders.
Setting the stage for future power battles over Greek banks, the government also said it had set a framework for the bank recapitalizations that would be required after the completion of a broader agreement for creditors to a voluntary write-down of up to 70 percent of Greek debt. That deal is said to be all but completed and now hinges on the Greek political parties’ accepting more austerity measures.
But while the three parties in Mr. Papademos’s fragile coalition government — the Socialist Party, the center-right New Democracy and the hard-right Popular Orthodox Rally, or L.A.O.S. — may have found consensus on a broader framework on Sunday, they still appeared to disagree on crucial details in the new austerity measures, potentially jeopardizing the whole arrangement.
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