Greece's coalition government will seek a bridging loan to tide it over while it scrambles to find 11.7 billion euros of spending cuts to bring a derailed bailout plan back on track and appease exasperated international lenders.
The measures must be submitted for approval by July 24, when auditors of the so-called "troika" of the EU, the IMF and the ECB are expected to return to Athens for a check-up mission.
The visit, and subsequent haggling that is expected to last until September, will determine whether the EU and IMF continue bank rolling Athens or abandon it and let it slide towards chaotic default and eventual exit from the euro zone.
The troika has already turned the screws on cash-strapped Athens, effectively suspending payments under its ongoing 130 billion euro rescue and prompting it to seek a bridging loan from its lenders to cover financing needs until September.
"We are fighting to secure the bridging loan by September," a finance ministry official told reporters.
Cabinet members and senior ministry officials have been holding daily meetings to thrash out the spending cuts. Finance Minister Yannis Stournaras is expected to submit on Wednesday a draft list to the leaders of the three parties comprising the country's ruling coalition.
"Since last Thursday, there is a methodical effort by all ministers to find realistic proposals," Deputy Finance Minister Christos Staikouras told Reuters. "We must be ready by July 23," he added.
The cuts, equivalent to 5.5% of GDP, must be enforced over the next two years for the budget deficit to narrow to below 3% of GDP by the end of 2014 from 9.3% in 2011.
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The government is considering a wide range of cuts, such as lowering caps on high pensions, closing tax loopholes, reducing the government's operating expenses, cutting public hospitals' costs and cracking down on fraud to curb social spending.
Athens has pledged to streamline public administration to make it leaner. The government is also considering proposals to extend military service to reduce its need for professional soldiers and to make the church pay half of the salaries of priests, thousands of whom are on the government's payroll.
Measures worth 5.6 billion euros out of the 11.7 billion total have been identified so far.
But Greece's fragile coalition government has little scope to find the savings after it pledged to austerity-hurt voters it would not fire any civil servants and avoid across-the-board cuts of pensions and public sector wages.
The three-party coalition was cobbled together after pro-bailout parties won a narrow victory in elections last month. Conservative Prime Minister Antonis Samaras has pledged to renegotiate the bailout and soften its terms, particularly by spreading the 11.7 billion euro cuts over four years to soften their impact on the economy.
He will meet the leaders of the co-ruling Socialist party, Evangelos Venizelos, and leftist Democratic Left, Fotis Kouvelis, on Wednesday morning to secure their approval for the cuts before final decisions are taken.
Unemployment climbed to a record 22.5% in April. Economic output has shrunk by about a fifth since 2008, when the country's recession started.
The finance ministry official acknowledged that pushing through the cuts would not be easy, but that the government was determined to come up with the austerity measures.
Tax revenues were almost 1 billion euros below target in the first half of the year. The country's privatisation agency said it would not manage to raise more than 3 billion euros this year as had been planned. And the country has failed over a string of targets set out under its bailout plan since March.
