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Greek PM seeks opposition backing on deficit plan

ATHENS, Greece - ATHENS, Greece (AP) — Greece's new prime minister engaged opposition party leaders in rare crisis talks on the troubled economy Tuesday, a day after he announced a raft of spending cuts during a speech in which he warned the country risks drowning in debt.

Socialist George Papandreou met with leaders of parties ranging from the Conservatives to the Communists, to seek support for measures designed to pull Greece out of its worst debt crisis in decades. Tuesday's meeting, chaired by the country's president, focused on tackling corruption. Other talks are expected to follow in the days and weeks ahead.

Papandreou, speaking after the meeting, said he and the party leaders had been in agreement on several points, "despite our possible ideological differences." Most of the leaders also said they had shared views on certain issues regarding tackling corruption.

But they gave a frostier reception to the measures Papandreou announced in his Monday night speech.

"What is he asking us to support? His generalities? His delays?" Antonis Samaras, the conservative opposition leader, questioned earlier Tuesday during a speech to his party deputies. "His delays have already been punished by the markets. If this attitude of indecisiveness continues it will be catastrophic for the Greek economy and for the country."

Left wing-backed trade unions were also unconvinced, with one reiterating a call for a nationwide strike on Thursday.

"There will no truce, no truce in fighting for the rights of the workers," said Giorgos Skiadiotis, spokesman for Communist-backed trade union PAME which organized a rally of about 100 people outside the Finance Ministry Tuesday morning.

Athens municipal contract workers also took to the streets, saying Papandreou's pledge to reduce state contract workers by a third would make their already precarious position worse.

Market reaction was lukewarm. The Athens Stock Exchange closed 2.12 percent down Tuesday, while the cost of insuring Greek sovereign debt rose further.

"I think they've still got problems and it will be very difficult given the political and social discontent in Greece to implement stringent budget cuts," said Neil Mackinnon, global strategist at VTB Capital. "The theme of sovereign credit risk is not going to go away."

Earlier, Moody's Investor Services, which has put Greece on warning for a possible credit rating downgrade, said 2010 would likely be a "tumultuous" year for sovereign risk. Moody's is expected to complete its current assessment of Greece's rating by early next year.

Athens has come under pressure from the European Union to straighten out its finances and obey deficit limits intended to support the shared euro currency. Its deficit spending is projected to reach 12.7 percent of economic output in 2009 — four times higher than the EU's 3 percent limit for countries using the euro.

Papandreou promised to bring the deficit down to below 3 percent by the end of 2013, and pledged that Greece's debt, which has soared to a staggering euro300 billion ($442 billion), will begin to be reduced by 2012 at the latest.

"The 2010 budget, which is being discussed in the Greek Parliament, and Mr Papandreou's statement, are steps in the right direction," said Joaquin Almunia, European Commissioner for Economic and Monetary Affairs.

But he said Brussels wanted to see "concrete measures that will strengthen fiscal adjustment in 2010 and ensure a fast consolidation of public finances" when Greece sets out its plans for the Stability Program — the EU's review of euro-zone countries' budgets.

"We will continue to monitor the macroeconomic and fiscal situation and the implementation of the measures," he said.

Speaking to union and business leaders Monday night, Papandreou announced measures including slashing public sector bonuses, caps on salaries for public utility directors, defense spending cuts and eliminating cost-of-living increases for state employees with salaries of more than euro2,000 ($3,000). Social security and government operating expenditures will be cut by 10 percent each, while the prime minister said the salaries of ministers and deputies, as well as his own, would also be curtailed.

He also called for taxes of up to 90 percent on large bonuses for private bankers, the introduction of a capital gains tax and the resumption of inheritance and property taxes abolished by the previous government.

But some said the reforms might be too slow.

Political analyst and publisher Giorgos Kyrtsos said it would take between six and nine months to pass legislation implementing Papandreou's measures, and a total of 12-18 months before results could appear.

"In my opinion, Greece doesn't have that kind of leeway with Brussles and the markets," he said.


Associated Press writers Nathalie Rendevski-Savaricas in Athens, Aoife White in Brussels and Pan Pylas in London contributed to this report.


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