Greek Prime Minister Antonis Samaras has talked junior partners in his fragile coalition government into dropping objections to new spending cuts demanded by the debt-crippled country's bailout creditors, averting a crisis that could have eventually forced Greece to abandon the euro.
Without the 11.5 billion euro ($A13.5 billion) package of cuts for 2013 and 2014, Athens would lose access to the international loan program that is protecting it from bankruptcy.
"The prime minister said that it must be accepted - as a necessary condition for our country to remain in the eurozone and to be able to negotiate further - to further cut public spending by 11.5 billion euros," Finance Minister Yannis Stournaras said yesterday. That position was accepted."
He said negotiations with creditors would start now and announcements will be made toward the end of August on the full details of the cutbacks - which Greek officials say will include new reductions in pensions and benefits.
"The basic aim is to minimise the effect on society," Mr Stournaras added. He said Greece would also try to secure an extension in its two-year austerity deadline, a key pledge of all three coalition partners.
Socialist Pasok leader Evangelos Venizelos said he backed down from demands for some of the cuts to be delayed to avoid bringing down the six-week-old government and forcing new elections.
"If the prime minister believes that the immediate adoption of all the 11.5 billion euro measures will then allow him to negotiate (with creditors) and that only that will secure payment of the next loan instalments and the country's position in the euro, I am obliged to accept his estimate," Mr Venizelos said. "We will not lead the country to elections."
But Mr Venizelos insisted that the new cutbacks should not involve "unfair, across the board measures".
Mr Venizelos spoke after two-hour talks with Mr Samaras, a conservative, and Fotis Kouvelis, head of the moderate Democratic Left party. It was their third meeting in less than a week.
International bailout creditors are closely scrutinising the country's lagging austerity and reform program, and a negative report next month would likely lead to the vital rescue loans being halted.
Debt monitors from the International Monetary Fund, European Central Bank and European Union - known as the troika - will meet Mr Stournaras today.