Prime Minister Antonis Samaras will call for a two-year extension to Greece’s austerity program when he meets Angela Merkel and François Hollande next week, the Financial Times reported on Wednesday.
Mr. Samaras will suggest that public spending cuts be spread over four years instead of two to help the plunging Greek economy return to growth during the talks with the German chancellor and French president, according to a document seen by the newspaper.
The Greek prime minister is to meet in Athens on Tuesday with the head of euro zone finance ministers, Jean-Claude Juncker, before travelling to Berlin to meet with Ms. Merkel next Friday and with Mr. Hollande in Paris on Saturday.
Greek officials were not immediately available for comment as Wednesday was a public holiday.
But Ms. Merkel’s spokesman Steffen Seibert said that the German position on Greek reforms remains unchanged.
“Of course the chancellor will listen to what Mr. Samaras has to say here about the situation in Greece and the implementation of the program,” he told a regular government news conference in Berlin.
“But for the entire German government, the agreed memorandum of understanding which states what the Greek obligations are remains the basis of all aid decisions.”
Greece’s government is currently scrambling to find budget cuts – amounting to €11.5-billion ($14.2-billion U.S.) or around 5 per cent of GDP – to be implemented in 2013 and 2014 as part of its existing bailout deal with the European Union and International Monetary Fund.
Mr. Samaras has made it known since before taking office in June that he favours spreading out the spending cuts demanded by Greece’s international creditors, the European Union and International Monetary Fund.
Greek officials have long argued that the magnitude of the cuts demanded in exchange for bailout loans risk pushing the country into such a vicious circle of recession that it won’t be able to meet its reform targets.
Preliminary figures show that the Greek economy contracted by 6.2 per cent in the second quarter and expectations are now that it fall by seven per cent overall this year – its fifth year of recession.
According to the FT the Greek government would need an additional €20-billion to cover the budget shortfall in case spending cuts are spread out over an additional two years.
It would not ask the EU for additional bailout funds but would seek to delay beginning repaying rescue loans from 2016 to 2020, tap an existing IMF loan and issue additional short-term treasury bills, said the newspaper.
Finding the €11.5-billion in unpopular cuts has caused strains in Greece’s new coalition government, with only about two-thirds of the amount agreed.
With unemployment already at 23.1 per cent, the government is reluctant to carry out job cuts or send public workers on temporary furloughs.
The spending cuts are key to unlocking the next instalment of EU-IMF bailout loans, which crucial for the Greek government to stay afloat.
Back-to-back elections in May and June threw its reform program off track, with the next instalment of bailout loans of nearly €31.5-billion is not expected before October.
In order to avoid an impending cash crunch the government made on Tuesday its biggest sale of short-term debt since taking its first bailout in 2010, raising €4.1-billion in three-month treasury bills.
Greece has been shut out of the long-term debt markets since 2010, but has regularly issued small amounts of short-term debt.