Greek Politicians Strike Deal Over New Cuts

Greek politicians have reached a deal over new austerity measures, the indebted country's prime minister has announced.

In a statement, the office of Greek PM Lucas Papademos said the coalition partners had come to an agreement on new cuts with its creditors, a move needed to secure a new £109bn (130bn euro) bailout.

Officials have laboured since October to secure the money, needed to make up a budget deficit shortage of about £2.5bn.

But, as finance ministers from the 17 countries which use the euro, together with the heads of the ECB and the IMF, gathered in Brussels they warned they were not quite ready to release the money.

Luxembourg prime minister Jean-Claude Juncker, who will chair the meeting, said: "I do not have reasons to believe that there will be a definitive deal this evening."If it's not tonight, it will be done next week."

He said that despite "enormous progress" by Greece the eurozone ministers needed time to "examine in detail the different strands on the table".

Germany's finance minister Wolfgang Schaeuble said the conditions for the bailout include bringing Greece's debt level down to 120% of GDP by 2020, limiting official rescue loans to 130bn euros and getting approval from the Greek parliament."Those general requirements are not fulfilled yet," he said.

IMF managing director Christine Lagarde, however, praised "very encouraging" signs from Greece ahead of the meeting.

The Greek PM's statement said earlier that negotiations with representatives of the European Union, the European Central Bank and the International Monetary Fund, collectively known as Troika, had been successfully concluded.

It said that there was "a general agreement on the content" of Greece's new financing programme, without which the country would be forced to default on its bond payments next month.

Marathon talks between the socialist, conservative and far-right party leaders backing Mr Papademos' interim government ended on Thursday morning with agreement on most of the austerity measures demanded by creditors to make up the budget deficit shortage.

The politicians signed up to a 22% reduction in the miniumum wage and a total of 150,000 job cuts in the public sector, of which 15,000 will go this year.

But talks faltered over plans to slice even more from pensions, leaving a £524m (625m euro) gap in the deal.Full pensions are already in line for a 15% cut, according to reports.

Some economists believe Greece is contracting at such a rate the cuts are not severe enough, and believe the ECB may have to make up the shortfall by swapping some of the Greek debt it holds for bonds issued by the temporary bailout fund, the European Financial Stability Facility.

Greece has run up total debt of about £294bn (350bn euros), roughly 160% of its gross domestic product, and the IMF has insisted that level be brought down to a maximum of 120% of GDP by 2020.Private creditors are also negotiating a write-off of Greek debts worth at least £84bn (100bn euros), and are to meet on Thursday in Paris.

Greece is reliant on international handouts to stay solvent and it faces a £12bn (14.4bn euro) bill on March 20, when it has to pay back bondholders.

Without this second bailout, it could be forced a default, triggering a so-called credit event, which would have severe consequences for the global economy.