Greece, troika talks hit snag on labour reforms

Greece's labour minister and international lenders briefly suspended talks on austerity cuts on Tuesday to confer with their leaders on the thorny issue of labour reforms, which have prompted objections from government coalition partners.

After weeks of tense negotiations on 11.5 billion euros ($15 billion) of budget cuts in 2013-2014, the talks hit a fresh snag on the issues of scrapping automatic wage increases and reducing severance payments, part of labour market measures the lenders say are needed to make Greece more competitive.

"The troika demands feed recession and galloping unemployment," Fotis Kouvelis, leader of the small Democratic Left party, said after a meeting among the parties of the conservative-led government of Prime Minister Antonis Samaras.

The on-off talks on the austerity package, needed so Greece can secure a tranche from a 130-billion-euro bailout keeping it afloat, have been frequently marred by tension and disagreement on issues ranging from wage cuts to public sector reforms.

Officials acknowledge the two sides remain at loggerheads over many issues but played down speculation that talks between the labour minister and the so-called troika of lenders from the European Commission, European Central Bank and International Monetary Fund had broken down.

"It's not a breakdown," a labour ministry official told Reuters earlier on Tuesday. "The prime minister as well as the other political leaders must be briefed on the progress of the negotiations."

After the leaders' met, talks with the troika resumed. Chief negotiators said they expected pending issues to be wrapped up.

"We made progress," the IMF's Greece mission chief, Poul Thomsen, told reporters late on Tuesday. "We have reached agreement on most policy issues. The few ones that remain we expect to cover soon."

Greece needs to clinch an agreement on the cuts as well a long list of reforms before it can unlock aid. Samaras has said the country has money until the end of November.

"This package must be the last one," said Evangelos Venizelos, leader of the socialist PASOK, the other junior partner in the ruling coalition. "We must conclude the talks but not haphazardly and not at any cost."

The government wants two more years to meet its fiscal targets to soften the impact of the austerity measures it is about to take and IMF chief Christine Lagarde has backed giving Greece more time.

A senior Greek finance ministry official, speaking on condition of anonymity, said Greece's talks with the troika were already taking place under the assumption that a two-year extension would be granted.

"The issue of the extension has been put on the table. The troika is working based on this," the official said, adding that without the two-year extension, Greece would need to take measures worth 18 billion euros.

"The measures will be worth 13.5 billion euros, full stop," the official said.