Greek leaders to ask for time to hit loan targets

Fresh from elections in which Greek voters pulled back from the brink of confrontation with its international creditors, the country is set to risk further ire by asking for more time to meet the targets it has been set in return for loans.

While the leaders of three of the main parties said they would announce a deal over a broad-based coalition today, preparations have begun for a critical round of meetings with its European partners.

Most Greeks are expecting some sort of "peace dividend" from Brussels and Berlin after a campaign in which even the pro-bailout parties vowed to renegotiate the terms of Greece's €173bn agreement. Under intense international pressure, the majority of Greeks eschewed parties who wanted to scrap the austerity measures, a move which could have precipitated an exit from the euro.

The conservative New Democracy party, which won most seats on Sunday, and Pasok, its likely Socialist coalition partner, will ask other eurozone countries for an extra two years to meet Greece's fiscal targets. The request would amount to asking for an additional €16bn from Europe, something German Chancellor Angela Merkel has so far ruled out.

"The new government must stick to its commitments, which the country has agreed on," Ms Merkel said at a meeting of leaders from the G20 group of major economies in Mexico.

However, Greece's European creditors are keen to strengthen the support for the new government, which faces huge popular opposition to the tough conditions attached to the international bailout. Both the conservatives and socialist establishment parties made campaign promises to slow the pace of austerity measures, knowing that more time will mean more money from the Troika of the European Central Bank, the EU and the International Monetary Fund.

The cuts in public spending that are needed to take Greece from the five per cent primary budget deficit it now faces to the four per cent surplus it would need to start paying down debt are being asked for against a backdrop of rapid economic retrenchment. The economy is set to contract by seven per cent this year, tax receipts have been decimated by the political chaos and unemployment has reached 22 per cent.

Greek officials told the Dow Jones news agency that they will ask for €6.6bn in aid payments so the Greek state can clear its massive arrears owed to the private sector, such as pharmacies which have, in many cases, stopped supplying medicines.