ATHENS, Greece (AP) — Greek Prime Minister Lucas Papademos and his coalition partners have struck a deal on new cuts demanded by creditors to secure a vital €130 billion bailout.
A spokeswoman for the prime minister's office says the agreement with the majority Socialists and the conservatives will allow alternative cuts to those rejected early Thursday during a meeting of the three coalition party leaders.
She spoke on customary condition of anonymity.
Although all the other cuts demanded by Greece's eurozone partners and the International Monetary Fund were approved, party leaders had balked at new pension cuts.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
ATHENS, Greece (AP) — Greece's crucial €130 billion ($173 billion) bailout was in limbo Thursday, after political leaders failed to accept the entire batch of new austerity measures that are demanded by creditors but have fueled outrage in the recession-hit country.
After marathon meetings with party leaders and international debt inspectors that ended about 5 a.m. (0300GMT), Finance Minister Evangelos Venizelos headed to Brussels to meet his counterparts from the other 17 euro countries, hoping to rescue the agreement and stave off bankruptcy.
"It is up to the eurogroup to decide at the highest level if the conditions are in place to proceed with the second (bailout) program," said Amadeu Altafaj Tardio, a spokesman for the European Commission, one of the three institutions charged with negotiating the rescue conditions.
Also attending the meeting in Brussels will be Christine Lagarde, the head of the International Monetary Fund, as well as Mario Draghi, the president of the European Central Bank.
Resistance is huge in Greece to more austerity. The country has endured two years of vicious spending cuts, the economy is in its fifth year of recession and unemployment is at a record 21 percent rate. Angry union leaders announced a 48-hour general strike for Friday and Saturday.
The Athens talks stalled after leaders of the three parties backing Greece's coalition government approved sweeping new austerity measures but balked at demands to make €300 million ($398 million) in pension cuts and another €325 million ($431 million) in savings.
The sums are relatively small compared with the bailout package, but if Athens does not make up for it, it faces a potentially devastating default next month.
Venizelos issued a dramatic plea to the coalition leaders to swiftly resolve their differences, warning that Greece's "survival over the coming years" depends on the bailout and a related debt-relief agreement with private creditors.
"It will determine whether the country remains in the eurozone or whether its place in Europe will be endangered," said Venizelos. "There is no room for any other expediency: we must look Greeks in the eye, look at the national interest and the interest of our children."
Markets nevertheless seemed hopeful that a deal will eventually be reached, with analysts suggesting the political leaders wanted to show their resistance to the foreign demands ahead of general elections later this year.
The euro rose 0.2 percent, while Greece's main stock exchange was the Stoxx 50 index of leading European shares rose 0.1 percent.
Jacob Funk Kirkegaard, research fellow at the Peterson Institute for International Economics, said the lack of a full agreement during Wednesday's talks highlights the "certain amount of political theater involved here."
"The political leaders in Athens are campaigning," he said. "They need to be seen by the Greek population as fighting until the very last drop of blood. ... They are facing off against the Germans and IMF and the rest of the world."
The debt inspectors from the European Union, the European Central Bank and the International Monetary Fund — known as the troika — held talks for five hours through the night with Prime Minister Lucas Papademos, Venizelos and Labor Minister Giorgos Koutroumanis.
But they failed to resolve the latest sticking point: a demand for cuts in supplementary pensions worth about €300 million.
Athens will have to agree to that before a deal on the bailout can go ahead.
Greece will also have to agree to cut another €325 million in savings, though it will have 3 weeks to identify where to make them, said a person close to the negotiations, speaking on condition of anonymity because of the sensitive nature of the talks.
The delay on these cuts will not affect separate talks with private investors to forgive about €100 billion ($132 billion) in Greek debt, a government official in Athens said. The writedown, known as Private Sector Involvement, depends on approval of the €130 billion bailout, which will partially finance the bond swap.
He said the PSI deal will proceed separately, "provided it is approved by the eurogroup." The official spoke on condition of anonymity, due to the sensitive nature of the talks.
The Greek premier's office said there were no immediate plans for a new meeting Thursday between Papademos and coalition backers — socialist George Papandreou, conservative Antonis Samaras and George Karatzaferis, leader of the rightist LAOS party.
On Wednesday, the three leaders held talks with Papademos for seven and a half hours and backed a major new austerity program that includes a 22 percent cut in the minimum wage, firings of civil servants, and an end to dozens of job guarantee provisions.
Unions responded angrily, announcing a 48-hour general strike for Friday and Saturday.
Ilias Iliopoulos, secretary-general of the ADEDY civil servant union, told the AP protest rallies will be held outside Parliament in central Athens on the two days, and on Sunday when lawmakers are expected to vote on the new austerity measures.
Iliopoulos said the decision was taken together with the main private sector GSEE union.
Greece's economic situation is dire — unemployment hit a record 20.9 percent in November, up from 18.2 percent in the previous month, according to the national statistics agency.
In all, more than a million people were without a job. In the 15-24 age group, unemployment reached 48 percent.
A disorderly bankruptcy by Greece would likely lead to its exit from the euro common currency, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal, Ireland and Italy.
Without help, Greece would not have enough money to pay off a big bond payment due on March. 20, triggering a default that risks sending shockwaves throughout financial markets and the global economy.
Greece has been kept solvent since May 2010 by payments from a €110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.
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Gabriele Steinhauser in Brussels and Demetris Nellas in Athens contributed to this report.
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