Greece headed for a cliffhanger vote on austerity measures needed to keep the bailout on track as a 48-hour general strike began and European officials squabbled over the timing of a deal to unlock rescue funds.

European Union Economic and Monetary Affairs Commissioner Olli Rehn, speaking at a meeting of Group of 20 finance chiefs in Mexico City, said yesterday that a deal must be made at a meeting of EU finance ministers in Brussels on Nov. 12. A European G-20 official, speaking before Rehn and on condition of anonymity, cast doubt on the prospects for that deadline, saying officials may fall short.

Greece is under pressure to make more efforts to rein in its budget deficit and deregulate the economy. While German Chancellor Angela Merkel last month travelled to Greece to signal her willingness to keep Greece in the euro, the country is still struggling to hit its debt reduction targets amid a combination of Greek political resistance to more cuts and economic collapse.

“We need to have a common view on how to reduce the debt burden by the 12th of November,” Rehn told reporters. “I'm confident that we will be able to reach that common view.”

Greece has received 240 billion euros ($307 billion) in aid pledges from the EU and the International Monetary Fund since 2010. The parliament's finance committee today agreed to fast-track a bill of austerity measures and economic reforms submitted by Prime Minister Antonis Samaras's government late yesterday.

Lawmakers must ratify the bill for Greece to ensure speedy payment of the next bailout tranche and avoid bankruptcy, Finance Minister Yannis Stournaras told the committee today. The package will raise the retirement age and make further cuts to wages and pensions.

“Chances are that the bills will pass, in our view,” Citigroup Inc. economists Giada Giani and Juergen Michels wrote in a report to investors yesterday. Should they not pass, a Greek exit from the euro “will come back on the agenda. If Samaras' government is not able to get the bills through parliament, this is likely to change the recently more supportive stance from Greece's creditor countries, especially Germany.”

Internal Dissent

Samaras must face down dissent within his three-party coalition to get the measures approved, with the Democratic Left party's lawmakers saying they won't vote for the bill because of proposed changes to labor law that among other things will cut wages for public workers. Unions began a 48-hour general strike today to protest against the measures, which will be voted on as soon as tomorrow and followed by another vote on the 2013 budget on Nov. 11.

More than 35,000 Greeks marched in central Athens to demonstrate against the new wave of cuts. There have been no arrests or reports of violence, Police spokesman Takis Papapetropoulos said.

As G-20 finance ministers and central bankers warned euro- area leaders not to delay pledged policies aimed at resolving the three-year-old debt crisis, policy makers in the 17-member single-currency bloc are working to repair Greece's finances and forge closer European banking cooperation.

German Finance Minister Wolfgang Schaeuble said after the meeting that the EU won't have an operational bank-supervision body before 2014, as the crisis is resolved “step by step.”

“It's not going to happen quickly, but it has to work,” Schaeuble told reporters yesterday in Mexico City. Officials at the meeting didn't speak in detail about Greece, Schaeuble said.

The G-20, which diluted budget-cutting commitments out of concern that U.S.-led austerity would choke already fragile global growth, lauded the European Central Bank for unveiling a bond-purchase program to stabilize the single currency. At the same time, political decisions must be implemented, the G-20 said.

Rehn hailed Europe's determination to do “whatever it takes” to stabilize the currency, saying that a banking union would be followed by a centralized bank-resolution mechanism — and then a “genuine” economic and monetary union.

“We expect that these actions will lead to a gradual recovery, but somewhat later than previously expected,” Rehn said.

Debt Sustainability

The European official who questioned the Nov. 12 target and spoke on condition of anonymity because the negotiations aren't public said next week's Brussels meeting will be a step in the process. A package deal has to include both prior actions by the Greek government on fiscal and economic measures and an agreement from creditors on filling the country's finance gap and making debt sustainable. A list of options is being reviewed, the official said.

“We would need a combination of elements,” Rehn said.

Separately, Spanish Economy Minister Luis de Guindos said in Mexico City yesterday that his government will make a decision on asking for a bailout when it's ready. He said he didn't come under any pressure from G-20 officials.

Bloomberg News

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Greece Faces Cliffhanger Vote on Cuts

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