ATHENS (Reuters) ? Greece edged towards a deal on Saturday to avert a chaotic default, hammering out a plan for recapitalizing its tottering banks, but other issues remain - and it must still persuade its political leaders to back painful reforms involved in the rescue.
Athens must wrap up talks with its foreign lenders on a 130 billion euro bailout and get its own party leaders on board by Sunday to ensure funds begin flowing in time for the country to pay back 14.5 billion euros of debt falling due in mid-March.
But Greece has struggled to convince its European partners and the International Monetary Fund footing the bill for its rescue that it has the ability or will to push through tough reforms, and Finance Minister Evangelos Venizelos said their patience was wearing thin.
"There is great impatience and great pressure not only from the three institutions that make up the troika but also from euro zone member states, each of whom have their own criteria, their own problems, their own priorities," Venizelos told reporters after a conference call with his euro zone counterparts.
"We are on a knife-edge," he said.
He described the conference call as "very difficult" but said they had agreed on a plan to recapitalise Greek banks and on details on privatisation. But sticking points on wages and spending cuts remained, and Venizelos warned that the stakes were rising as time runs out to clinch a deal.
"The distance between the successful completion of the procedures and an impasse which could happen by accident or because of a misunderstanding is very small," he said.
Athens' talks with its international lenders have stumbled over their demands, which include cutting labor costs by axing holiday bonuses and lowering the minimum wage - proposals vehemently opposed by Greek political party leaders.
Marathon negotiations on Friday with the European Union, European Central Bank and the International Monetary Fund ended with crucial issues still unresolved.
"The troika is not backing down on wages, holiday bonuses and supplementary pensions," a Greek government official said after ministers met to discuss the reforms on Saturday.
"None of these issues have been resolved. They are all open and the onus is on political leaders."
Technocrat Prime Minister Lucas Papademos was due to continue talks with lenders on Saturday in a bid to clinch agreement before calling in the socialist, conservative and far-right leaders in his coalition to seek their blessing.
That meeting of party chiefs, initially scheduled for Saturday, has now been put off until Sunday early afternoon, a government source said.
PROOF OF COMMITMENT
Increasingly frustrated with Athens' inability to enact the reforms needed to reshape the recession-hit Greek economy, foreign lenders have demanded proof of the country's commitment to spending cuts before doling out any more funds.
They want all the country's political chiefs - who are keen not to be linked directly with the painful reforms as they gear up for elections expected in April - to back the measures, irrespective of the outcome at the polls.
"Greek political leaders must offer their commitment to the program," said a source close to the lenders.
"No more loans will be approved if they don't."
The lenders have demanded extra spending cuts worth about 1 percent of GDP - or just above 2 billion euros - this year, including big cuts in defense and health spending.
Defense spending would be cut by 400 million euros this year and next, while health spending would be cut by 1.1 billion euros in 2012, government officials said.
The Kathimerini newspaper reported on Saturday that if political leaders did not reach a deal on reforms, Papademos was considering asking them to either authorize a new round of negotiations with the troika or themselves join the discussions.
Ordinary Greeks are seething as round after round of austerity measures is imposed on them as the price for saving the country from default.
About 2,000 demonstrators clad in black, some hooded or wearing helmets, waved red flags, beat drums and chanted "Burn parliament" as they marched to protest over austerity measures and the politicians they blame for the economic pain imposed on the country.
Dozens of leftist protesters also held a demonstration outside the prime minister's office.
Athens has repeatedly said the talks on a bond swap with private holders of Greek debt and on the bailout are in their final stage. But it has failed to secure either deal after weeks of wrangling, largely due to concern that the rescue plan will not do enough to cut Greece's debt burden to a manageable level.
European Union sources said on Friday that euro zone governments may now have to cough up an extra 15 billion euros on top of the 130 billion agreed in October because of the funds needed to recapitalise Greece's ailing banks.
Athens also wants public creditors like the ECB to take part in the bond swap deal, under which banks and insurers will take real losses of about 70 percent on the Greek debt they hold in a bid to ease Greece's debt burden by 100 billion euros.
The bond swap talks were now the easier part of the overall process to save Greece, Venizelos said earlier on Saturday.
Representatives for the banks and insurers are expected to continue talks in Athens over the weekend.
(Additional reporting by Angeliki Koutantou and Ingrid Melander, Writing by Deepa Babington; Editing by Hugh Lawson)
Source: http://us.rd.yahoo.com/dailynews/rss/business/*http%3A//news.yahoo.com/s/nm/20120204/bs_nm/us_greece
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