Euro zone backs Greek aid extension, seeks clearer reforms

Tue Feb 24, 2015 1:52pm EST
 
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By Jan Strupczewski and Matthias Sobolewski

BRUSSELS/BERLIN (Reuters) - Greece secured a four-month extension of its financial rescue on Tuesday when its euro zone partners approved a reform plan, as Athens backed away from some proposed measures and promised that spending to alleviate social distress would not derail its budget.

Finance ministers sealed the decision in a telephone conference convened by Eurogroup chairman Jeroen Dijsselbloem after the new leftist-led Athens government sent him a detailed list of reforms it plans to implement by the end of June.

The respite, to be ratified by some national parliaments in the coming days, averted an imminent banking meltdown and a potential state bankruptcy for now, but tough negotiations lie ahead soon over the country's longer-term economic future.

A Greek finance ministry official said the euro zone's most heavily indebted nation would start discussions immediately with its EU and IMF partners on meeting this year's financing shortfall.

"The discussions on Greece's funding gap will begin tonight, tomorrow morning," the official said, speaking on condition of anonymity. Options included allowing Athens to issue more short-term t-bills and using ECB profits on Greek bonds, he said.

As required by the creditors, Marxist Finance Minister Yanis Varoufakis had sent Brussels a six-page document late on Monday that watered down campaign promises to end privatizations, boost welfare spending and raise the minimum wage, vowing to consult partners before key reforms and to keep them budget-neutral.

In a statement, the 19-nation Eurogroup urged Greece to develop and broaden the list of reform measures, based on "the current arrangement" -- a euphemism for the bailout agreement which leftist Prime Minister Alexis Tsipras had vowed to scrap.

IMF Managing Director Christine Lagarde said the reform plan was "not very specific", and much clearer assurances would be needed on key reforms of pensions, taxation and privatization.   Continued...

 
A presidential "Evzon" stands guard (L) as Giorgos Paganis, 52, a marble craftsman from the island of Tinos, adds the words "Mediterranean" and "Aegean" onto the Tomb of the Unknown Soldier, under a list of places where Greeks fought modern history battles, outside the parliament in central Athens, February 24, 2015.   REUTERS/Yannis Behrakis