Greek unions and employers' associations have blocked a critical element of a rescue deal put forward by the European Union, accusing negotiators of crippling the economy with wage cuts and tax rises that will undermine growth, the Guardian writes.
In a joint letter to the Greek prime minister, Lucas Papademos, the employers and unions said a cut in the minimum wage was non-negotiable and the focus of talks should switch to the tax system, the complexity of regulation and corruption.
Athens is under pressure to wrap up talks on a bond swap and a €130bn (£108bn) bailout to avert a chaotic default. But hopes of an imminent deal faded after eurozone finance ministers put off a meeting expected on Monday to finalise the rescue. The ministers may meet later next week instead, said its head, Jean-Claude Juncker.
The unions' and employers' statement undermined efforts by the coalition government to agree a package of reforms as demanded by the country's international lenders if Athens is to receive the crucial €130bn second rescue package.
The three main parties in the coalition will meet on Saturday to discuss the situation, though sources close to the talks said a quick resolution was unlikely.
The refusal of unions to accept further wage cuts and the discovery earlier in the week of an extra €15bn hole in Athens's accounts are expected to force negotiators to rethink their tactics over the weekend.
The troika of officials from the International Monetary Fund, European Central Bank and EU want Greece to agree a package of spending cuts and reforms before they release the fresh €130bn of funds.
Splits have opened up inside the Greek coalition, which includes right- and leftwing parties, as leaders jockey for position in the runup to the elections scheduled for March.
Antonis Samaras, the leader of the conservative New Democracy (ND) party, which is leading in opinion polls, opposes cuts to pensions and to wages in the private sector, which he argues would deepen the current recession. The ND leader joined employers in proposing a salary freeze, though even this plan is rejected by unions, which have already accepted 14% wage cuts.
Disagreements within the ranks of the troika have also undermined the talks. The IMF's lead negotiator said earlier this week that the deepening crisis in Greece should persuade negotiators to relent on some cuts in favour of more far-reaching reforms.
The EU, with the backing of the German government, has made it clear that Greece must accept severe austerity measures as the price of a bailout.
The coalition is ready to agree a framework deal struck last week with banks that hold around €206bn of the country's debt. The banks are ready to accept a near-70% writedown in their loans to Greece in exchange for new 30-year bonds.
