ATHENS, Greece - Crucial talks aimed at averting Greece's bankruptcy were held up early Thursday after leaders of the three parties backing the country's coalition government failed to agree to creditors' demands to make €300 million ($398.22 million) cuts to state and private pensions.
The talks broke up after a seven-hour meeting on austerity needed for the €130 billion ($172.56 billion) bailout package.
"There was very broad agreement on all parts of the program, with one exception," Prime Minister Lucas Papademos, who later met debt inspectors from the European Union and the International Monetary Fund, said in a statement.
Greece needs the €130 billion deal to avoid a March default and is being pushed to wrap up negotiations in Athens before a meeting of eurozone finance ministers in Brussels scheduled for 1700GMT.
Papademos needs approval from all coalition parties — the majority Socialists, main rival conservatives and the rightwing LAOS party — before signing off on the deal.
But a spokesman for the Socialist party, Panos Beglitis, said the parties had already accepted demands by rescue creditors to slash the gross monthly minimum wage by 22 per cent from €751 to €586, with the minimum pay for those under 25 dropping 30 per cent to €527 a month.
The wage drop had been considered the main sticking point for the agreement.
The leaders' talks hit a snag over a €300 million ($398 million) gap in cuts needed to reach the 2012 fiscal target. EU-IMF negotiators had proposed cuts in supplementary pension payments above a threshold level of €150 ($200) a month. Most private pensions in Greece are state-guaranteed.
Athens has already accepted a demand to fire up to 15,000 workers in the public sector in 2012, but is under pressure to impose deeper cuts.
It was unclear whether the coalition leaders — Socialist George Papandreou, conservative Antonis Samaras and LAOS leader George Karatzaferis — would hold an overnight meeting to resolve the dispute. All three have retired to their homes
"At 2 a.m., all I can say, is a line from the Beatles: 'It is a hard day's night,'" Karatzaferis told reporters upon leaving his party's headquarters for home.
Jacob Funk Kirkegaard, research fellow at the Peterson Institute for International Economics, said the lack of progress made during Wednesday's talks highlights the "certain amount of political theatre involved here."
"The political leaders in Athens are campaigning," he added. "They need to be seen by the Greek population as fighting until the very last drop of blood. ... They are facing off against the Germans and IMF and the rest of the world."
Samaras said he was obliged to bargain hard to ease the plight of ordinary Greeks, who have suffered increasing hardship during a four-year recession, with unemployment now topping 19 per cent.
"For some it is a novelty to negotiate ... We want to ease the people's suffering," said Samaras, whose centre-right New Democracy party is leading polls ahead of a general election, expected as early as April.
A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal, Ireland and Italy. Two years of cutbacks already have seen unemployment rise to around 19 per cent and poverty to 20 per cent in Greece, according to data from the EU statistics agency Eurostat.
The coalition talks have been repeatedly postponed this week to make time for exhaustive negotiations with representatives of the EU, the European Central Bank and the IMF — known as the troika — on whose approval the continued flow of Greece's vital rescue loans depends.
Without help, Greece would not have enough money to pay off a big bond redemption payment due on March. 20, triggering a default that risks sending shockwaves throughout financial markets and the global economy.
As anger mounts in Greece at the prospect of further economic pain, patience is running out abroad.
German Chancellor Angela Merkel's spokesman, Steffen Seibert, said Greece must swiftly return to a sustainable, viable path.
"This is not a question one can take a lot of time to tackle," Seibert said. "It is important that the negotiations now come to an end."
Late Tuesday, Greece's private creditors signalled progress on a separate, linked agreement that would cut the country's privately held debt load by 50 per cent, or some €100 billion ($131 billion).
The intention is to ensure that Greece's long-term debts are sustainable. Banks, pension and hedge funds and other private sector holders of Greek debt are expected to swap their current bonds for new ones worth 50 per cent less than the original face value, with longer repayment terms and a lower interest rate. They are also expected to get a €30 billion payment — which is to come from the €130 billion bailout — as part of the bond swap deal.
Greece has been kept solvent since May 2010 by payments from a €110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.
Two years of harsh austerity measures have made Greek voters increasingly hostile.
Some 91 per cent of Greeks believe the coalition government is taking the country in the "wrong direction," according to a February tracking poll published Wednesday in Greek daily Kathimerini.
Support for the Socialists, who won a landslide election victory in 2009, has dropped to 8 per cent, while the neo-Nazi Golden Dawn group has attracted 3 per cent support — enough to achieve representation in parliament, according to Public Issue survey. Conservative New Democracy led with 31 per cent, which is not enough to form a government on its own. Sampling data was not available.
Nicholas Paphitis in Athens, Gabriele Steinhauser in Brussels and Juergen Baetz and Geir Moulson in Berlin contributed to this report.