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Greece warned austerity measures could be wasted

Greece's Prime Minister Antonis Samaras speaks at the Greek parliament in Athens, July 24.

Thanassis Stavrakis/AP

Greece's international lenders on Friday warned government leaders that three years of harsh austerity would be wasted if delays continue in getting the second €174-billion bailout program back on track, people with knowledge of the discussions said.

The "troika" of officials from the European Commission, International Monetary Fund and European Central Bank wrapped up a three-day monitoring mission to Athens with separate meetings with conservative premier Antonis Samaras, and socialist leader Evangelos Venizelos. They are partners in a three-party coalition government that also includes left-wing leader Fotis Kouvelis. The troika did not make any statement.

The troika is expected to return in September to assess progress before deciding whether to disburse a €31.2-billion loan tranche due in June but delayed because of missed targets.

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The EU and IMF officials held a stormy discussion with leaders of Greece's trade union federation GSEE, which is trying to reverse a 22-per-cent cut in the minimum wage and of reforms making the labour market more flexible. Both were approved by parliament earlier this year.

"The fiscal consolidation program has failed … It had a huge impact on wages and employment levels, but has barely affected prices of goods and services," said Yannis Panagopoulos, GSEE president.

The governing coalition has already agreed on €3-billion of extra measures to keep this year's budget deficit under control. It endorsed another €11.5-billion of spending cuts for 2013-14 in principle on Thursday, but the two left-of-centre parties disputed about €1.5-billion of the cuts on grounds they would "increase social misery," said an official from Mr. Kouvelis's Democratic Left party.

The three leaders would meet again on Monday to hammer out a final agreement, a government spokesman said. Mr. Venizelos and Mr. Kouvelis raised objections to proposals to cap pension payments at €2,200 to €2,400 a month, and slash health-care spending to €1,500 for each person registered with the state system.

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