Greece will commit itself to spending cuts worth 11.5 billion euros in the hope of earning more time from its international creditors to enact reforms, senior government officials said on Wednesday.
"The negotiation starts now," Finance Minister Yannis Stournaras told reporters after a two-hour meeting between Prime Minister Antonis Samaras and his socialist and moderate leftist coalition allies.
"Cutting public spending by 11.5 billion euros is a prerequisite to keep Greece in the eurozone and to enable further negotiation," Stournaras said.
The coalition meeting -- the third in a week -- was held during an ongoing EU-IMF audit of the country's economic performance, including delayed reforms, and with the finance ministry warning that the country's cash is running low.
Behind closed doors, Samaras told his partners that Greece would be "isolated" by its creditors if it failed to make the cuts, state television NET reported.
The premier said Greece could aim for a two-year fiscal extension if it showed credibility at this stage, NET added.
Stournaras said the cuts would "aim to minimise social effects" and would be finalised towards the end of August.
The coalition's socialist partner Evangelos Venizelos said he had grudgingly agreed to this strategy but wanted European peers to publicly recognise the country's "huge sacrifices" over the last two years.
"If the prime minister feels that immediately adopting the measures worth 11.5 billion euros ... will safeguard future loan releases and the country's place in the euro, I am forced to accept his view," Venizelos said.
"We are waiting (to see) the results," he said.
Moderate leftist leader Fotis Kouvelis, the third partner, added: "In no way do we abandon the effort to secure a time extension on fiscal adjustment and the overall negotiation to disentangle ourselves from the tough terms of the (EU-IMF) loan agreement."
The budget cuts, applicable in 2013 and 2014, were originally to have been finalised last month but back-to-back elections postponed the decision.
They are necessary to unlock a 31.5-billion-euro ($39-billion) loan disbursement by September, part of the country's latest 130-billion-euro rescue package.
Greece's so-called 'troika' of creditors -- the EU, the International Monetary Fund and the European Central Bank -- have made it clear that the money will not be released unless the country's reforms are put back on track.
Greek media had earlier reported that Venizelos and Kouvelis were balking at the cuts after years of austerity already imposed on the recession-hit country.