February 24, 2014 / 8:03 AM / 5 years ago

Greece resumes protracted bailout talks with lenders

ATHENS (Reuters) - Greece resumes bailout talks with its international lenders on Monday, hoping to end six months of wrangling over the release of new rescue loans it needs to avoid default.

A man leaves the Bank of Greece headquarters in central Athens November 27, 2013. REUTERS/John Kolesidis

At stake is the disbursement of funds to repay 9.3 billion of bonds maturing in May, the biggest single debt redemption Greece faces in the next three decades, according to Thomson Reuters Eikon data.

The review by the European Union and the International Monetary Fund has dragged on since September, with disagreements about the extent of savings and reforms Athens must make to comply with the terms of its bailout.

Lenders say the government is dragging its feet over reforms, such as softening employment protection and introducing more competition, for fear of hurting vested interests and losing voters’ support.

“For six months we’ve been going over the same issues again and again, largely because the Greek government can’t agree among themselves”, one source close to the lenders told Reuters.

Athens, in turn, accuses the “troika” of the EU, the IMF and the ECB of needlessly protracting talks by misreading economic data, underrating Greece’s progress and demanding unpopular measures where none are needed.

“The troika have been tragically wrong in their forecasts and this has created huge problems,” Finance Minister Yannis Stournaras said earlier this month, shortly before Athens predicted it would hit a 2013 primary budget surplus of at least 1.5 billion euros, far above troika estimates.


Despite the row, the review is expected to conclude, as all previous ones since Greece was first rescued in 2010. Athens has already obtained 218 billion euros out of the 237 billion set aside for it under the bailout, which expires later this year.

The troika’s arrival in Athens is a signal that the sides have reached an outline agreement, although they may miss a self-imposed March 10 deadline when euro zone finance ministers are scheduled to meet in Brussels to sign off on the deal.

“There’s still a lot of work to be done in Athens. Problems are not insuperable but the time scale is extremely tight,” the official said.

Talks will focus on implementing a set of proposals put forward last year by the OECD to make the Greek economy more competitive, such as removing market barriers and unnecessary regulation in several sectors, including building materials, food and publishing, a Greek finance ministry official said.

“The OECD reforms and the recapitalization of banks will be the main issues in this negotiation,” the official said, speaking on condition of anonymity.

The troika will not ask for any new austerity measures because it is already largely convinced that Greece will meet its fiscal targets this year, hitting a primary budget surplus of 1.5 percent of GDP, the Greek official added.

“The fiscal issue of 2014 is all but settled. The only question is to see how big the surplus of 2013 has been and we’ve also been asked to provide a report on how we will cover a projected fiscal gap for 2015,” the official said.

According to both officials, the two sides will likely reach an initial agreement by March 10 that will spell out the OECD-inspired reforms Athens will need to adopt in a single law by May to obtain the funds needed to repay the bonds.

“The disbursement will be likely split in sub-tranches,” the finance ministry official said. Greece has agreed to implement about 80 percent of the OECD reforms, another senior government official told reporters on Sunday.


But delays have already caused uncertainty, undermining the hoped-for recovery, after six years of austerity-fuelled depression which wiped out nearly a quarter of the economy and brought unemployment to a record 28 percent.

A row between Athens and the troika over how much more additional bailout money Greek banks need is hampering their ability to lend to credit-starved companies, a senior bank executive told Reuters earlier this month.

“The Greek banks and the Greek economy are the victims,” said Petros Christodoulou, deputy chief executive of Greece’s biggest lender National Bank (NBGr.AT).

The fragile coalition led by Prime Minister Antonis Samaras needs tangible recovery signs to face off an increasingly confident anti-bailout opposition, leading in the polls.

A poor showing at municipal and European elections in May might destabilize the government, threatening to curtail its four-year term ending in mid-2016.

Greece’s main opposition party Syriza has said it will try to trigger early elections in spring 2015 by blocking the election of a new president.

Additional reporting by Angeliki Koutanout; Editing by Robin Pomeroy

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