Barroso in Greece as officials finalise spending cuts

European Commission President Jose Manuel Barroso was to meet Prime Minister Antonis Samaras on Thursday as officials threw together a list of 11.6 billion euros in spending cuts to jumpstart reforms.

Barroso, who is making his first visit to Athens in three years, is to meet with Samaras at 1430 GMT.

The spending cuts, reportedly to come largely from pensions, health support and benefits, are designed to help Greece negotiate a longer fiscal overhaul to cope with a deep recession, a finance ministry official said.

"It's a weapon to request a two-year extension," the official said after talks between Finance Minister Yannis Stournaras and senior EU-IMF auditors.

IMF representative Poul Thomsen said he was "absolutely" satisfied with the course of the ministry talks so far.

Greece has so far avoided broaching the extension issue amid open hostility from its European creditors who accuse the crisis-hit country of dragging its feet on the necessary reforms agreed over the past two years in return for cash.

The spending cuts finalised on Thursday, still to be approved by the socialist and moderate leftist parties in conservative Prime Minister Antonis Samaras' coalition, were originally to have been voted into law last month.

But the process was delayed as Greece held back-to-back elections in May and June before a workable government could be formed.

The audit report, expected to be made public at the end of August or early September, will determine whether Greece will draw 31.5 billion euros from its EU-IMF loan programme to keep the economy afloat.

The money is needed to pay state salaries and pensions, and to recapitalise banks hit by a sovereign debt rollover earlier this year.

Greece must also redeem 3.2 billion euros in debt to the European Central Bank that expires on August 20.

But in Brussels as in Athens most agree that Greece will not be able to reach the goals included in the second bailout package that it signed with its creditors in February.

Government officials are hoping for a message of support at a time when speculation is rife that Greece will be forced to crash out of the eurozone.

"We now believe the probability that Greece will leave EMU in the next 12-18 months is about 90 percent, up from our previous 50-75 percent estimate, and believe the most likely date is in the next 2-3 quarters," said Citibank chief economist Willem Buiter.

Analysts of macro economic research consultancy Capital Economics estimate that a possible extension would equal an additional help of 40 billion euros ($48.4 billion) for Greece, from overburdened European rescue funds.

Analysts from French bank Societe Generale believe this sum to be around 60 billion euros.

For European countries that have already asked their parliaments twice, in 2010 and 2012, to provide their Greek partners with emergency loans, a third rescue would be too much, especially at a time of recession, observers say.

Greece's main union GSEE said the new cuts were "unfair and ineffective" and constituted a "killing blow" after two years of prior austerity.

Unions are determined to give a "dynamic" response, it added.

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