Greek cabinet meets to decide more austerity steps

Reuters

By George Georgiopoulos and Renee Maltezou

ATHENS (Reuters) - Greek Prime Minister George Papandreou chairs a cabinet meeting on Sunday to decide on more austerity measures to secure continued funding under an international bailout.

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EU and IMF inspectors are holding a conference call with Finance Minister Evangelos Venizelos on Monday to hear what measures Greece will take to plug this year's shortfall in the budget before they release an 8 billion euro ($11 billion) loan tranche it needs by October before it runs out of money.

Papandreou canceled a planned visit to the United States on Saturday to deal with the deepening crisis at home as euro zone partners made clear further funding for the debt-ridden country would hinge on adhering to agreed fiscal targets.

"The meeting is set to examine measures from public sector layoffs to more pension cuts," said a government official on condition of anonymity.

Last week, the government blamed the shortfall on a deeper-than-expected recession and decided to put a new tax on real estate in the hope of collecting about 2 billion euros annually.

But international inspectors, known as the troika, expressed doubts this one-off tax measure would work and demanded more details on how the government hoped to catch up this year and the next.

"The troika thinks the recently announced property levy will not suffice to plug the budget hole and is pressing for measures on the spending side -- cuts in public sector wages and employment," said a second government official who asked not to be named.

The conservative New Democracy opposition has criticized the government for overtaxing the economy and driving it into a tail spin.

Its leader, Antonis Samaras, called for snap elections on Saturday saying the policy mix was wrong and was not yielding any results despite peoples' sacrifices.

"A renegotiation with our lenders to restart the economy is a condition to get out of this crisis," Samaras told a news conference on Sunday.

International lenders are also concerned with the lack of political consensus in Greece on the measures needed to emerge from the crisis.

The conservatives have been buoyed by growing public discontent after two years of austerity measures and are proposing tax cuts and growth boosting measures instead.

Papandreou's socialists have a majority in parliament but political analysts say internal dissent and public unrest, such as strikes and violent protests, may force snap elections.

Lenders have long warned against one-off measures and more taxes as a way out of the crisis shaking the euro.

They have asked for urgent reforms and privatizations to make the economy more competitive and a reduction in the bloated public sector.

($1 = 0.725 Euros)

(Writing by George Georgiopoulos; editing by Elizabeth Piper)