Samaras expressed the Greek government’s support to Cyprus, while his discussion with Anastasiades focused on possible solutions, after the rejection of Eurogroup’s plan.

Earlier Samaras met with coalition party leaders Evangelos Venizelos and Fotis Kouvelis to discuss developments in Cyprus and how they affect the Greek economy.

Exiting the Maximos Mansion, Finance Minister Yannis Stournaras told reporters that “Greece is shielded” and Cyprus “will not default”, Kathimerini writes.

“The eurozone made a historic mistake which needs to be fixed now”, PASOK leader Venizelos said after the meeting.

Democratic Left leader Kouvelis told reporters that European partners “must reconsider their decision”, stressing that Cyprus’s problems cannot be solved with measures of this kind.

The Cypriot parliament said “no” to Eurogroup plan of cutting the Cypriot deposit. 36 MPs voted against the bills and 19 abstained, while there was no vote in favor, according to protothema.gr.

The communist AKEL, the socialist EDEK, the Greens, the European Party and the centrist DIKO, which is in the co-governing coalition, voted against the measure. The ruling Democratic Rally abstained from voting, enet.gr informs.

“We live the criticality of developments and historical circumstances. The decisions we take today will not be forgotten quickly, but will write history. The country is under an unjust and unprovoked attack. We will not give anyone the right to turn us into a guinea pig,” Democratic Party chairman Marios Karoyian said.

“We are at a decisive turn in our history. Developments in Cyprus will seal the political developments in the EU. This time Cyprus becomes the guinea pig for the haircut in deposits. Behind the decision of the Eurogroup hide political expediencies. I propose to withdraw the request for assistance from troika,” AKEL secretary Andros Kyprianou said.

Protests were underway outside the parliament in Nicosia since the parliamentary debate started at 6pm. Crowds outside parliament broke into applause, chanting: “Cyprus belongs to its people.”

Meanwhile, Cypriot Finance Minister Michalis Sarris, arrived in Russia for talks with officials there. Cyprus will attempt to strike a deal with Moscow for the sale of troubled Popular Bank of Cyprus, known as Laiki, with Russians most likely seeking some form of compensation for such an investment, Kathimerini writes.

Anastasiades is also thought to be examining the option of making use of social security funds’ reserves, which amount to EUR 5 billion, and offering depositors with more than EUR 100,000 a voluntary haircut in return for natural gas-indexed bonds, the paper reports.

Finance Minister Yannis Stournaras said in Parliament: “The country had reached the edge, it run the risk of exiting the Eurozone and go bankrupt. We, the three parties that support the government, are trying at the lowest possible cost -for the Greek citizen- to bring the country into a sustainable situation.

Meanwhile, the International Monetary Fund is preparing to send a staff mission to Greece next month to assess the country’s performance under an austerity program backed by an international rescue, an IMF spokesman said Thursday.

The IMF mission will begin discussions in Athens with Greek and European Union officials in late February, IMF spokesman Gerry Rice said at a news briefing.

“A staff team will start discussions in Athens with the authorities, the European Commission, and the European Central Bank in late February. The purpose of the mission is to assess progress on the implementation of measures in the programme. The visit is expected to conclude around mid-March.”

Alternate Finance Minister Christos Staikouras pledged yesterday that the government will pay debts amounting to EUR 3.5 billion by the end of March as its agreement with its creditors provides for, rising to 8 billion by year-end. According to Kathimerini, the Finance Ministry intends to pay debts to the market amounting to some EUR 8 billion by the end of the year, having already fulfilled obligations totaling EUR 962 million and expecting to pay another EUR 1.9 billion by the end of February.

The IMF released €3.2 billion euros in aid to Greece in January that had been frozen for months amid fears about the country’s ability to surmount its debt crisis.

The IMF executive board approved release of the funds after completing two reviews of Greece’s economic performance under an IMF loan programme that is part of an international rescue also supported by the European Union. Both IMF and EU have committed a total of 240 billion euros in rescue loans to Greece since 2010.

The IMF has been pushing Europe to do more to solve the Greek debt crisis, after the Fund extended its Greek rescue loan to four years from three years and lowered the interest charged on it.

The Eurogroup welcomed the result of the debt buy back operation, which will lead to a substantial reduction of the Greek debt-to-GDP ratio.

The Eurogroup reaffirmed that this, together with the initiatives agreed by the Eurogroup on 27 November and full implementation of the adjustment programme, should bring Greece’s public debt back on a sustainable path, to 124% of GDP in 2020. Greece and the other euro area Member States are prepared to take additional measures, if necessary, to ensure that this objective is met.

On that basis, Member States have authorised the EFSF to release the next instalment for a total amount of EUR 49.1 billion.

The disbursement will be made in several tranches. EUR 34.3 bn will be paid out to Greece in the following days. The remaining amount will be disbursed in the first quarter of 2013. First, a further amount to cover bank recapitalization and resolution costs will be paid out in January 2013. Second, funds to cover budgetary financing will be disbursed in three sub-tranches, linked to the implementation of specific MoU milestones to be agreed by the Troika.

The Eurogroup is convinced that continued fiscal and structural reforms, building on the strong commitment demonstrated in the recent past and the wide range of reforms already carried out, will allow the Greek economy to return to a sustainable growth path with higher employment, thus paving the way towards a more prosperous future. We strongly encourage the Greek citizens to sustain their efforts and to implement the necessary reforms.

“Greece will require additional financing, which may take the form either of official-sector involvement or of additional loans, hopefully on more favorable terms,” Catsambas said, according to WSJ.

According to the paper, Samaras has asked his Eurozone partners for a two-year extension to meet budget deficit reduction targets, something that would create an extra EUR 20 billion funding gap for the period. The government has explored funding this with increased issuance of shorter-term treasury bills, thus avoiding direct extra financing from its creditors, but Catsambas said it would be “totally unrealistic” to assume that Greece could fill the gap entirely on its own.

Catsambas insisted that it should be the euro zone and ECB that take the strain of filling the rest of the gap. “Extension of repayment of the IMF [part of] loans is impossible as all terms and conditions of IMF loans to all countries are based on rules that are not negotiable,” he said. The failure of Greece to implement its agreements, and the lack of a sustainable debt trajectory, make it impossible for the IMF, under its own charter, to lend any more.

Catsambas said that the previous coalition government under Lucas Papademos, who took over from George Papandreou in November last year, estimated that “only 22% of the commitments under the troika-supported program were implemented” in 2011. Catsambas noted that the public sector still needs to be shrunk as a

Finance Minister Yannis Stournaras yesterday denied the WSJ report. “The country ́s positions are formulated by the Prime Minister and the Finance Minister,” Stournaras told Reuters

According to Kathimerini, a list with the with the first 20 state organizations from around 250 that are to be merged and abolished is expected to be announced today. The first 20 organizations on the list are to be merged with some 200 regional bodies across the country in coming days and weeks while the full list of organizations to come under the ax is to expected to be made public by the end of August, the paper writes.

Government meetings with troika representatives will commence with a list of measures the latter will present, describing the gap between planning and targets accomplished. This list could include actions needed to cover EUR 3 to 4 billion that are missing from the implementation of the bailout agreement.

According to media reports, the meetings will be of preliminary character, since neither of the two sides is ready to negotiate directly. Troika heads will have the results of the inspection of the technical staff that show a gap in state reveneue (estimated somewhere in between EUR 2.4 to 2.6 billion) as well as deficits in pension funds and public hospitals (another EUR 1.2 billion). Given the accelerating recession that is expected to reach 7% of GDP, the hole in the budget could reach around EUR 4 billion by the end of the year.

Troika people know that the Greek government cannot negotiate new measures. In any case, according to the initial planning, discussions are expected to conclude in late August, setting also the basis for an initial draft of the 2013 budget and the revised medium term financial plan.

The next tranche of Eurozone aid is unlikely to be paid before September, the European Commission said yesterday, noting international lenders had to finish an assessment of government-planned reforms that are far behind schedule, Reuters reports from Brussels.

“We have formally approved the memorandum that lays out the conditions under which Spain can be lent money for the recapitalisation of its banks,” Frieden said, according to Reuters.

In a conference call, ministers voted on a detailed memorandum of understanding with Spain spelling out the terms of the aid, which will be fully disbursed by the end of 2013, Reuters writes.

The full amount of money needed to shore up Spain’s banks will not be known until September, after individual banks have been assessed. The agreement calls for an initial disbursement of €30 billion ($36.9 billion) this month.

“The aim of this program is very clear: to provide Spain with healthy, effectively regulated and rigorously supervised banks, capable of nurturing sustainable economic growth,” Olli Rehn, the European monetary affairs commissioner said in a statement, according to AP.

But interest rates on Spanish debt continued to rise, suggesting financial markets are pessimistic about the country’s future, the Financial Times reported.

Parliament approved on Thursday a package of 65 billion euro ($80 billion) spending cuts and tax hikes which are likely to deepen the recession already gripping Spain.

The bailout memorandum of understanding follows Germany’s approval Thursday of the deal, which includes 3 percent interest for 15 years and a 10-year grace period.

The austerity vote prompted hundreds of thousands of Spaniards, led by public-sector workers, in more than 80 cities to take to the streets on Thursday, protesting Rajoy’s government.

Sources told Kathimerini that the leaders, rather than leave the issue of renegotiating the MoU, until September, they agreed that Greece should adopt a more proactive stance. As a result, it is likely that Finance Minister Yannis Stournaras will be asked to bring up the issue at a Eurogroup meeting, which is due to take place towards the end of July

However, the task of renegotiating the terms will not be left up just to Stournaras. Samaras, Venizelos and Kouvelis are likely to form the key negotiating team but officials at other levels will also be involved.

Government officials said to protothema.gr that in the Eurogroup, Finance Minister Yannis Stournaras moved along the lines he had agreed with the Prime Minister and that the issue of extending the fiscal adjustment will come at the appropriate time in order to bring the most positive results for Greece.

ND says, the paper writes, that since the transfer of the renegotiation has a political cost, Venizelos wants to record a different attitude in order to avoid his share of the blame, and use it to his advantage later on. Venizelos who sees politics in connection with the ongoing weakening of his party insists on creating a national negotiating committee so that he could involve SYRIZA as well or charge it for avoiding to contribute to the national effort.

By searching for alternative measures, the coalition government is tryin to avoid implementing once again horizontal measures that could affect as many as 200,000 employees in the public sector.

Depending on the results and the government’s ability to renegotiate with Greece’s lenders, the measure of wage reduction by 12% on average, which was abandoned before the elections, should come back in the form of a bill that would provide for a scale-based cut in order to protext lower wages; high wages could end up suffering reduction that will probably exceed 20%.

Measures affect judiciaries, NHS doctors, academics, diplomats, high priests and uniformed army and police personnel, although a special formula is sought for the latter. The measure aims to save EUR 200 million euros this year and EUR 400 million in 2013.

According to media reports, these cuts will result in the elimination of dozens of benefits received by that portion of employees, as was the case with the single payroll in the public sector. The benefits that will be retained are expected to be integrated in the basic salary, while there might also be some minor increases (about 5%) in the final salary on the lower levels of the payroll.

Eurozone finance ministers agreed Tuesday to offer Spain 30 billion euros by the end of the month to help its troubled banks.

After nine hours of ministerial talks, Jean-Claude Juncker, the Luxembourg premier who also heads the Eurogroup , said a memorandum of understanding for Spain would be formally signed “in the second half of July,” with 30 billion euros ($37 billion) available by the end of the month.

The 27 ministers also agreed to extend a deadline for Spain to cut its public deficit to the EU 3.0 percent limit by one year to 2014 because of the difficult economic conditions Spain faces but underlined that Madrid must implement all the measures needed to bring its public finances in line with EU norms.

European economic affairs commissioner Olli Rehn insisted that Spain will have to meet all the obligations under the EU’s excessive deficit procedures.

Olli Rehn said Spain’s public deficit was now expected at 6.3 percent of Gross Domestic Product this year, 4.5 percent in 2013 and then 2.8 percent in 2014, according to AP. 

Spain in May revised its 2011 public deficit figure, saying that it stood at 8.9 percent, up from 8.51 percent reported earlier and way above the original 6.0 percent target for the year, according to AP.

The same month, the EU warned that Spain would miss its public deficit targets this year and next while remaining in recession through 2013.

The conservative government of Prime Minister Mariano Rajoy has pledged to cut Spain’s public deficit to 5.3 per cent this year.

Juncker and Rehn said the meeting had also discussed the situation in Greece, specifically about its newly elected government has planned, and had also reviewed the position in Cyprus, which has just asked for EU aid.

In a statement by the Cypriot government on Monday it said that it required financial assistance following “negative spillover effects through its financial sector, due to its large exposure in the Greek economy”.

Stefanos Stefanou, government spokesman, did not specify how much Cyprus would ask from the European bailout fund, saying that the amount would be negotiated in the coming days.

Meanwhile, the 27 leaders of the European Union are set to meet in Brussels for a two day summit starting on Thursday.

Stefanou said that despite its demand for European aid, the Cypriot government would continue negotiations for a possible loan from a country outside the EU, such as Russia or China.

The country needs to find about 1.8bn by a June 30 deadline to recapitalise its second largest lender, Cyprus Popular Bank.

Earlier on Monday, ratings agency Fitch became the third agency to downgrade Cyprus’ credit rating to junk status, estimating that the island will need another €4 billion ($5bn) to recapitalise its banking sector,according to AP. 

Meanwhile there is also increasing uncertainty about the new Greek government, with the incoming finance minister resigning over health reasons and Antonis Samaras, the prime minister, recovering from eye surgery -with a review of its bailout programme delayed.

Spanish bank shares leapt almost six per cent on Monday morning on their first day of trade following the deal to recapitalise the country’s struggling lenders, with Madrid’s IBEX 35 benchmark index rising to 6,929.9 points in early morning trading, Al Jazeera reported.

London’s FTSE 100 index jumped 1.80 per cent to 5,532.92 points, Frankfurt’s DAX 30 rose 2.04 per cent to 6,255.65 points and in Paris the CAC 40 rose 1.98 per cent to 3,110.96 points as investors jumped into financial shares in the opening deals.

The move came after weeks of increasing concern that bad loans at Spain’s lenders might overwhelm public finances. The dollar and yen fell on decreased demand for refuge assets as shares rallied, according to Bloomberg.

The euro rose nearly one per cent to $1.26694 on Monday, its highest level since May 23, according to Reuters.

The rise comes after a bailout package was agreed at the weekend, which Spanish economy minister Luis de Guindos stressed that it was not a rescue but a loan that imposed restrictions only on the country’s banks.

Mariano Rajoy, the Spanish prime minister, said on Sunday that the eurozone deal had secured Spain a “line of credit” for the country’s debt-stricken banks that would ensure the “credibility of the euro”.

Olli Rehn, the EU Economic Affairs Commissioner, said the Spain deal was critical to reassure jittery markets.

Spain’s economy is twice the size of the other bailed-out countries combined.