Greek Prime Minister Antonis Samaras moved closer to winning a delayed aid disbursement when European leaders praised his government’s budget-cutting push.

At his first European Union summit since becoming premier in June, Samaras said record unemployment showed the price Greece was paying for austerity demanded by the euro area as a condition for emergency loans. He urged parallel steps to kick- start the economy and stuck to a request for two extra years until 2016 to meet targets for narrowing the budget deficit, prompting signs of European goodwill.

“We welcome the determination of the Greek government to deliver on its commitments and we commend the remarkable efforts by the Greek people,” the 16 other euro-area leaders said in a statement released about 3 a.m. today in Brussels after the first session of the EU meeting. “Good progress has been made to bring the adjustment program back on track.”

The Samaras government has been negotiating with the euro area and the International Monetary Fund over 13.5 billion euros ($17.6 billion) of austerity measures for 2013 and 2014 needed to qualify for the release of more loan instalments. Transfers have been frozen since June.

The next aid payout is scheduled to total 31 billion euros, most of which would be to recapitalize banks. That disbursement would be under a 130 billion-euro rescue package approved earlier this year after an initial 110 billion-euro bailout in 2010.

Greek Recession

Creditors that also include the IMF are loosening the budget noose on Greece as its recession heads for a sixth year in 2013, domestic anti-bailout parties gain in popularity and the jobless rate reaches 25 percent. At stake is whether Samaras’s shaky three-party coalition can pay its bills, recapitalize domestic banks and stay in the 17-nation euro.

The softening in attitude was symbolized earlier this month when Chancellor Angela Merkel of Germany, the biggest European backer of the total 240 billion euros in rescue pledges for Greece since 2010, made her first visit to Athens since Europe’s debt crisis erupted three years ago. She held a meeting with Samaras today in Brussels as the second part of the EU summit got under way.

‘Big Progress’

“One has to recognize that a lot has already been done and that they’re pressing ahead” in Greece, Merkel told reporters afterward. She said she works “very well” with Samaras, who, at his own press conference, said “the climate has changed. All our European partners have recognized that we have made big progress lately. The Greek economy and society are on the brink.”

After an inconclusive election in May, Greece held a re-run the following month in which Samaras’s New Democracy party remained the biggest in the Greek parliament while still lacking a majority.

Samaras formed a government with the Socialist Pasok, which came in third, and the sixth-place Democratic Left. The ruling coalition is an unprecedented attempt at political unity in Greece after an anti-bailout party called Syriza overturned four decades of dominance by New Democracy and Pasok with second- place finishes in the May and June elections.

Greece narrowed its budget deficit from more than 15 percent of gross domestic product in 2009 -- five times the EU limit -- to 9.1 percent in 2011. The spending gap is due to shrink to about 7 percent of GDP this year.

Policy Reforms

“We expect Greece to continue budgetary and structural policy reforms and we encourage its efforts to ensure swift implementation of the program,” the euro-area leaders said. “These conditions will allow Greece to achieve renewed growth and will ensure its future in the euro area.”

French President Francois Hollande said the next aid tranche for Greece must be paid in “the coming weeks” once the euro area and IMF complete their current review of the nation’s finances.

Samaras said his request for a two-year extension to meet fiscal-austerity targets is tied to the questions of a 12 billion-euro funding gap that would result from the longer timetable and of the sustainability of Greece’s debt, which is supposed to fall to 120 percent of GDP in 2020. He said these issues would likely be decided after the creditors’ review.

EU Economic and Monetary Affairs Commissioner Olli Rehn said he expected Greece to win the green light for the next disbursement within a month.

‘Positive Conclusion’

“I’m confident that we will be able to come to a positive conclusion of this review,” Rehn told Bloomberg Television in Brussels yesterday. “I expect that this will happen in the early part of November, before mid-November.”

Luxembourg Prime Minister Jean-Claude Juncker signaled the onus is on euro-area governments to unblock the aid for Greece.

“I am very happy with the performance the Greek government has undertaken,” Juncker, who also heads the group of euro-area finance ministers, told reporters as he emerged from the first EU summit session. “Now it’s up to the other 16, after Greece will have delivered, to deliver.”

Bloomberg