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Greece readies reform deal as debt meeting looms

[ATHENS] Greece's new leftist government was fine-turning details on Tuesday of a reform deal it hopes to seal with sceptical EU creditors at crucial talks this week to liberate the country from a "toxic" bailout.

Prime Minister Alexis Tsipras faced a confidence vote in parliament over his policy package, but while he was expected to breeze through his first domestic political test, time to woo those holding the purse-strings was running out.

At talks kicking off with an emergency meeting of eurozone finance ministers on Wednesday, Greece will plead its case for stop-gap financing,with a view to clinching an austerity-free reform deal to run from September 1.

The new premier will meet Angel Gurria, chairman of the Organisation of Economic Cooperation and Development, on Wednesday to polish the government's proposals a day before a full EU summit in Brussels on Thursday.

Mr Tsipras is pushing for creditors to loosen the tough conditions of the 240-billion-euro (US$270-billion) bailout Greece was forced to accept in the aftermath of the financial crisis, to allow it to spend more to give its economy a boost.

Athens will propose that the "toxic" fiscal obligations of its present EU-IMF bailout deal - including a debt load worth 1.75 times the country's entire annual economic output - be replaced by a 10-step reform blueprint drawn up in cooperation with the OECD, a Greek finance ministry source said Monday.

The government is ready to play ball on 70 per cent of its reform obligations but wants to overhaul the remaining 30 per cent, the source said.

While Greece's creditors want Athens to apply for an extension to the bailout - and stave off the risk of bankruptcy - the government is pushing for a bridge loan which would buy time for negotiations but free it of its austerity shackles.

The source said such a deal could let both sides save face: "We call it a bridge. They can call it a technical extension." Greece's main daily, the centre-left Ta Nea, said the Greek proposals add up to "a programme which begins to look like an attempt at a compromise aimed at finding an agreement, though we're still far off." Defence Minister Panos Kammenos said late Monday that if negotiations with the eurozone fail, the country would go to 'Plan B', which could involve asking for funding from the United States, Russia or China.

But Mr Tsipras had appeared to rule out that idea last week, saying the government had "no other thoughts" at the moment than settling the issue with Europe because "we have obligations towards them." Germany and the EU have led calls for Mr Tsipras, whose radical left Syriza party stormed to victory in elections last month, to be more realistic.

European Commission chief Jean-Claude Juncker on Monday said he did not expect any new deal to be reached this week and told Greece it "must not assume that the overall mood in Europe has changed so much that the eurozone will unconditionally adopt" Mr Tsipras' proposals.

German Chancellor Angela Merkel also pressed Greece to present a "sustainable" finance plan that respects the "basic rules" of the bailout programme, and in Britain, Prime Minister David Cameron moved to draw up contingency plans for a Greek exit from the eurozone, dubbed a "Grexit".

His chancellor of the exchequer George Osborne, in Istanbul at a G20 finance ministers meeting, told Bloomberg Television "the risks of a miscalculation or a misstep leading to a very bad outcome are growing." Greece is under pressure to win approval for a new deal as quickly as possible because the European portion of the EU-IMF bailout is due to expire at the end of the month.

Tsipras's legislative programme will be go to a vote at midnight Tuesday (1000 GMT), but the new prime minister is set to win comfortably thanks to a government majority in parliament.

His proposals, unveiled Sunday, include raising the minimum wage, raising the taxable income threshold and ditching an unpopular property tax - all of which have been cheered by ordinary Greeks.

But the measures break several of the rules imposed by the 2010 bailout deal, and a skittish Athens market plunged nearly five percent on Monday, dragged down by big losses at the banks.

Persistent optimism from the Greek leader appeared to soothe frayed nerves, however, and the benchmark index opened higher on Tuesday rising by over 3.0 percent.