Greece pushes for deal with lenders on contested reforms (Reuters)

ATHENS (Reuters) ? Greece's government makes another push on Saturday to hammer out a deal with foreign lenders on a 130 billion euro bailout before turning to the trickier task of convincing wary political leaders to back the additional painful reforms involved.

On the brink of bankruptcy, Athens must wrap up talks with foreign lenders on the bailout and get political approval for it soon to ensure funds begin flowing in time for the country to pay back 14.5 billion euros of bonds falling due in mid-March.

But negotiations with its 'troika' of international lenders have struggled over their demands that it cut labor costs by axing holiday bonuses and lowering the minimum wage - proposals strongly opposed by Greek political party leaders.

After initial hopes that a deal with lenders from the European Union, European Central Bank and the International Monetary Fund could be secured on Friday, marathon negotiations ended early on Saturday with crucial issues still unresolved.

Finance Minister Evangelos Venizelos was due to resume talks with lenders on Saturday in a bid to clinch agreement before technocrat Prime Minister Lucas Papademos calls the socialist, conservative and far-right leaders in his coalition to seek their blessing.

That meeting of party chiefs, initially scheduled for Saturday, has now been put off until Sunday afternoon, a government source said.

Increasingly frustrated with Athens' inability to enact the reforms needed to reshape the recession-hit Greek economy, foreign lenders have demanded proof of the country's commitment to spending cuts before doling out any more funds.

They want all the country's political chiefs - who are keen not to be linked directly with the painful reforms as they gear up for elections expected in April - to back the measures, irrespective of the outcome at the polls.

"Greek political leaders must offer their commitment to the program," said a source close to the lenders.

"No more loans will be approved if they don't."

The Kathimerini newsapaper reported on Saturday that if political leaders did not reach a deal on reforms, Papademos was considering asking them to either authorize a new round of negotiations with the troika or themselves join the discussions.

Ordinary Greeks are seething as round after round of austerity measures is imposed on them as the price for saving the country from default.

Protesters from a leftist group held a demonstration outside the prime minister's office on Saturday, holding up banners against the political parties and the troika.

Athens has repeatedly said the talks on a bond swap with private holders of Greek debt and on the bailout are in their final stage. But it has failed to secure either deal after weeks of wrangling, largely due to concern that the rescue plan will not do enough to cut Greece's debt burden to a manageable level.

European Union sources said on Friday that euro zone governments may now have to cough up an extra 15 billion euros on top of the 130 billion agreed in October because of the funds needed to recapitalize Greece's ailing banks.

Athens also wants public creditors like the European Central Bank to take part in the bond swap deal, under which banks and insurers will take real losses of about 70 percent on the Greek debt they hold.

The bond swap talks were now the easier part of the overall process to save Greece, Venizelos said earlier on Saturday.

Representatives for the banks and insurers are expected to be back in Athens to continue talks over the weekend.

(Writing by Deepa Babington; Editing by Hugh Lawson)

Source: http://us.rd.yahoo.com/dailynews/rss/world/*http%3A//news.yahoo.com/s/nm/20120204/wl_nm/us_greece

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