According to Bloomberg Greek Prime Minister Lucas Papademos struck a tentative deal with political parties on austerity measures demanded by international creditors as European leaders maintained pressure to complete terms for a 130 billion-euro ($171 billion) rescue package.

Chiefs of the three parties supporting Papademos’s interim government were due to meet with the premier at about midday to hammer out details after setting a framework for recapitalizing banks, ensuring the viability of pension funds and reducing wages and non-wage costs to boost competitiveness. They agreed in a five-hour meeting yesterday to make additional reductions this year equal to 1.5 percent of gross domestic product.

With the country’s stability at stake, the accord marked a step forward as Athens played host to parallel negotiations over the weekend to secure the domestic consensus needed to win a second bailout while persuading Greece’s private creditors to accept bigger writedowns on their debt holdings.

This week, “Greece will be left, right and center taking it right down to the wire,” said Erik Nielsen, chief global economist at UniCredit SpA in London.

‘Make or Break’
Euro-area finance chiefs told Greek Finance Minister Evangelos Venizelos in a Feb. 4 conference call that an increase in the bailout package wasn’t forthcoming, underscoring their frustration at a lack of progress on fixing the economy. The effort to keep Greece from tumbling into default presents what Deutsche Bank AG Chief Executive Officer Josef Ackermann called a “make or break” moment.

The euro fell, losing 0.8 percent to $1.3048 as of noon in Athens amid the political wrangling.

Papademos was meeting the three party leaders today to hammer out the details of the measures. Antonis Samaras, the head of the second-biggest party, New Democracy, indicated he would oppose some measures that the so-called troika of international creditors have put forward.

“They are asking us for greater recession, which the country can’t take,” Samaras said as he left the meeting with Papademos. “I will fight to avoid that.”

Greece’s efforts to win a second bailout from the so-called troika -- the European Commission, the European Central Bank and the International Monetary Fund -- have hung in the balance over the past three days as negotiations in Athens failed to clinch an agreement. Venizelos said on Feb. 4 the talks were “on razor’s edge.”

Bond Redemption
Facing a 14.5 billion-euro bond payment on March 20 and general elections as soon as April, Papademos must heed international demands for greater austerity to complete the talks on a second aid package in time. Open questions involve how much more aid Greece needs, how much more austerity is required, and how to involve the European Central Bank in the private-sector creditor debt swap.

“If we determine that it’s all going wrong in Greece, then there won’t be a new program -- and that means in March you’ll have a declaration of bankruptcy,” Luxembourg’s Jean-Claude Juncker, who chairs euro finance meetings, told Der Spiegel magazine in an interview published yesterday.

Rescue Blueprint
The rescue blueprint includes a loss of more than 70 percent for bondholders in a voluntary debt exchange and loans that will probably exceed the 130 billion euros now on the table. A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due.

“One thing is clear: the Greek drama continues to unfold,” Joachim Fels, chief economist at Morgan Stanley wrote in a note yesterday. “A really, really bad scenario for the euro area -- a Greek default and departure from the euro area -- simply cannot be excluded.”

Greece has lagged behind budget targets set when it won an initial, taxpayer-funded rescue of 110 billion euros in May 2010, prompting euro-area threats to cut off aid and hastening a German push to make bondholders contribute. The country’s economy shrank 6 percent last year, according to the most recent IMF estimates, the budget deficit is still close to 10 percent of GDP and unemployment is about 18 percent.

Even after a second bailout, Greece may be saddled with too much debt, too little growth and too large a budget hole to do without even more money, which euro nations led by Germany are increasingly reluctant to offer.
Before the hoorays start, Greece’s biggest public-sector and private-sector union groups, ADEDY and GSEE, called a 24-hour general strike for tomorrow to protest austerity measures.