EU and Greece Negotiate More Painful Budget Cuts

The EU and Greece negotiated Monday over making more painful budget cuts amid reports that fellow European nations, like France and Germany, are preparing a rescue package for the indebted country.

Photo: EU and Greece Negotiate More Painful Budget Cuts

Europe's financial affairs chief Olli Rehn was in Athens to meet Finance Minister George Papaconstantinou, Prime Minister George Papandreou and other senior officials, to address the austerity program which the EU has warned must be expanded.

The talks came amid reports that officials in fellow European countries are preparing a bailout for Greece, to be finalized this week, The Associated Press reports.

The Wall Street Journal reported that state-owned banks and bond investors in France and Germany would be willing to buy as much as euro30 billion ($41 billion) in Greek bonds to calm market fears of a default. It cited anonymous sources familiar with the situation.

This could help the country meet its short-term debt needs, as some euro20 billion ($27 billion) worth of government bonds mature by the end of May. Greece plans to borrow some euro54 billion through sovereign debt issues this year, and has so far raised around euro13 billion.

"I am asking the Greek government to announce new measures in the coming days," Rehn told reporters following a meeting with Greece's finance minister George Papaconstantinou.

Papaconstantinou said the two men had discussed reforms to the pension system, the budget and the statistics service.

"The government will do whatever it takes (to cut the deficit)," Papaconstantinou said. "If necessary, it will take additional measures," Reuters reports.