Greek junior government party blocks reforms deal

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By NICHOLAS PAPHITIS, Associated Press

ATHENS, Greece (AP) — A junior partner in Greece's governing coalition has refused to lift its opposition to a new package of austerity measures, which bailout creditors have been demanding for months in exchange for more rescue loans.

Fotis Kouvelis, who heads the center-left Democratic Left party, said Tuesday that labor reforms to be included in the austerity package would encourage layoffs and further fuel unemployment, already at a record 25 percent as the country faces a sixth year of recession.

Debt-crippled Greece depends on international rescue loans, issued in return for harsh spending cuts and reforms. It must soon agree with creditors on a new austerity package worth €13.5 billion ($17.6 billion) over the next two years. Otherwise, it won't receive a desperately-needed new rescue loan payment next month. That could force the country to default on its debt mountain and possibly abandon the 17-country eurozone.

"Neither I nor the Democratic Left lawmakers will accept or vote for the changes in labor rights that (creditors) insist on," Kouvelis said after a meeting of the three coalition leaders under Prime Minister Antonis Samaras, a conservative.

The leaders have held nearly a dozen such meetings on the budget cuts since late July. The new package must be approved in Parliament, where the coalition has a comfortable majority despite having lost, in the past four months, three lawmakers who objected to the proposed cutbacks.

"Labor rights have already been severely weakened, and the demands would mean demolishing whatever rights have survived," Kouvelis said.

Greek officials say the main sticking point is bailout creditors' insistence on lowering workers' severance pay from private sector companies and scrapping automatic public sector salary increases.

Kouvelis had voiced the same strenuous opposition during the last meeting of the three leaders last week. Since then, Samaras has increased the pressure for a deal, which both Athens and debt inspectors from the European Union, International Monetary Fund and European Central Bank — collectively known as the "troika" — have said is possible within days.

In a brief address televised live later Tuesday, the prime minister offered hope that the troika can be talked into softening its demands.

"We have already — both on labor issues and on others — changed many, very many of the troika's original proposals," Samaras said. "And the negotiations continue."

While senior troika debt inspectors have ended their latest visit to Athens, Greek officials say the two sides continue their negotiations through e-mails. Finance Minister Yiannis Stournaras was to hold a conference call with troika officials late Tuesday, the ministry said.

Samaras warned last week that Greece will run out of money on Nov. 16 and absolutely has to get the €31.5 billion ($41 billion) loan installment by then. Stournaras dramatically warned that, without the money, many Greeks would face starvation.

The country has survived on international loans since May 2010, after it found itself unable to borrow from markets at affordable interest rates. The collapse followed Greece's admission that it had repeatedly under-reported the size of its budget deficit, which triggered downgrades of its credit rating to junk status.

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