Greece seeks more budget cuts to win bailout

Greece's coalition cabinet was to decide on Tuesday how to plug a 325-million-euro budget hole ahead of a eurozone meeting on a new bailout as data showed the economy shrinking at an alarming rate. In a cabinet meeting, the government of Prime Minister Lucas Papademos will discuss actions necessary under the new economic programme, his office said. Athens still needs to find 325 million euros ($429 million) to close the book on tough talks with its rescue partners -- the EU, IMF and the European Central Bank -- on a new eurozone bailout to avert a default in March. "A decision will be made on where this sum will come from," a finance ministry source said, with the government already eying more spending cuts. The Greek parliament approved Sunday a series of measures worth 3.2 billion euros in return for fresh aid, but some details still need to be filled in. At the same time, violent protests in Athens against the plan highlighted growing popular unrest as austerity policies undercut growth and employment, and politicians struggle to stick to their commitments. Eurozone finance ministers are scheduled to assess Greece's case for a second bailout on Wednesday, as warnings that Greece may be cast adrift if it fails to keep up are multiplying. Luxembourg Finance Minister Luc Frieden said late on Monday that if Greece cannot deliver on its promises, then the eurozone will move on without Athens. "I still think we should do our best to keep the eurozone with all of its members," Frieden said in Washington late on Monday. "Our preferred scenario is Greece complying, the eurozone giving additional funds and -- I cannot insist enough on this aspect -- clear monitoring of the implementation of what Greece has promised to do," he said. "If they don't do all this, I think then we must go on with 16 countries." To reassure increasingly sceptical lenders, Greek coalition leaders must provide written guarantees by Wednesday's meeting on their determination to carry through the austerity policies, even after early elections expected in April. Greece received more bad news on Tuesday with the economy shown to be shrinking sharply, but managed to raise short-term cash at lower rates. The economy, in recession for a fifth year, shrank by 7.0 percent in the fourth quarter of 2011 compared with output a year earlier, official estimates showed. If confirmed in later updates, this would correspond to a 6.8-percent contraction for the year, the semi-state Athens News Agency said, far outstripping a budget estimate of 5.5 percent. Greece was able to raise 1.3 billion euros ($1.72 billion) in a sale of three-month treasury bills with the return for investors dipping to 4.61 percent, the debt management agency said. The second Greek bailout, after a first in May 2010, is to provide 100 billion euros to the government and another 30 billion euros to strengthen banks. A bond write-down by private creditors is worth another 100 billion euros. Without financial assistance, Greece will be forced to default on a looming bond repayment of 14.4 billion euros on March 20. Prime Minister Papademos has six cabinet vacancies to fill after his government was hit with defections last week as parliament prepared to vote on the unpopular austerity package. Large demonstrations during Sunday's vote were marred by widespread violence in Athens that left over 120 injured and some 170 businesses damaged, with 45 buildings partly or completely destroyed by fire.