Samaras will ask for a 2-year extension

According to a document held by the Financial Times, Greece is seeking a 2-year extension of its fiscal adjustment program that aims to improve the sustainability of the Greek debt and the country’s prospects of returning to growth.

Just before Samaras’ meetings with Francois Hollande and Angela Merkel, Greece is seeking ways to reduce public spending by 11.5 billion euros.

According to the existing Greek rescue agreement with the EU and IMF, this staggering sum - roughly equivalent to 5% of the country’s GDP- must be found within the 2013-2014 period.

However, the plan of extending the adjustment program, as referred to in the FT letter, provides for the sharing of the new cuts until 2016.

In simple words, the Greek government will ask France and Germany to allow Greece to spread the package of 11.5 billion euros to 4 years starting in 2013; that is, reduce government spending by about 3 billion euros a year until the end of 2016.

Ioannis Mourmouras, senior economic adviser to the prime minister, said that the greater-than-expected recession for this year, with Greece’s GDP expected to fall by 7%, justifies the request for extension. "The deficit reduction requested for the 2013-2014 period is excessive. An overdose of austerity measures would be suicidal," he stressed.