February 2012

Greek Prime Minister Lucas Papademos met leaders of political parties in his coalition on Sunday to persuade them to back painful reforms demanded by the country's foreign lenders.

Now that the Papademos Government is close to clinching a debt swap deal with private bondholders, attention is shifting to difficult talks with lenders who want new austerity measures before they hand over funds from a 130 billion euro bailout.

But the mix of spending cuts and tough economic reforms risk heaping more misery on austerity-weary Greeks and few politicians want to be associated with them as Greek voters are leaving the main two parties, New Democracy and PASOK in droves.

"This is a crucial day. We must all show strength and seriousness," George Karatzaferis, leader of the far-right LAOS party that is one of three parties in Papademos's government, told reporters before entering talks at the premier's office.

Karatzaferis, whose party's ratings have slipped in opinion polls since December, in recent weeks has stepped up threats to quit the coalition citing a lack of cohesion between partners that include the social Democratic PASOK and conservative New Democracy parties.

Underscoring the struggle Papademos faces in implementing reforms, Greece's parliament last week voted against extending pharmacy hours soon after officials from the troika of lenders -- the European Central Bank, the European Union and the International Monetary Fund -- arrived in town to discuss the bailout.

They have demanded Greece make extra spending cuts worth 1 percent of GDP - or just above 2 billion euros - this year, including slashing defence and health spending as well as cutting redundant state entities.

But Greece's European partners and mainly Germany is pushing for Athens to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package, according to the Reuters agency.

Finance Minister Evangelos Venizelos reacted angrily to the suggestion on Sunday, saying Greece was perfectly capable of making good on its promises.