February 11, 2017 / 11:22 AM / in 6 months

Greece says bailout deal close, Juncker says it's on shaky ground

Greek Prime Minister Alexis Tsipras adjusts his shirt collar as he sits next to Deputy Prime Minister Giannis Dragasakis (C) and Digital Policy Minister Nikos Pappas before his speech at the ruling Syriza party central committee in Athens, Greece February 11, 2017.Michalis Karagiannis

ATHENS/BERLIN (Reuters) - Greek Prime Minister Alexis Tsipras warned international lenders on Saturday not to heap new burdens on his country but said he believed the drawn-out bailout review with them would end well.

European Commission President Jean-Claude Juncker, however, said the deal was "on shaky ground" because the International Monetary Fund had not decided what role it would play.

The comments came a day after Greece and its international lenders made clear progress towards bridging differences over Athens's fiscal path in coming years, moving closer to a deal that would secure new loan disbursements and save the country from default.

"(The review) will be completed, and it will be completed positively, without concessions in matters of principle," Tsipras told a meeting of his leftist Syriza party on Saturday.

But further cutbacks, particularly to pensions which have already gone through 11 cuts since the start of the Greek debt crisis in 2010, would be hard to swallow.

"We are ready to discuss anything within the framework of the (bailout) agreement and within reason, but not things beyond the framework of the agreement and beyond reason," Tsipras said. "We will not discuss demands which are not backed up by logic and by numbers."

He warned all sides to "be more careful towards a country that has been pillaged and people who have made, and are continuing to make, so many sacrifices in the name of Europe".

Accepting more reforms is fraught with difficulties in Greece which has only just emerged from a multi-year recession brought on by the debt crisis and the austerity demanded in exchange for the bailouts.

Greece's unemployment rate is 23 percent and while year-on-year GDP growth was 1.8 percent in last year's third quarter, the economy contracted at a rate of more than 10 percent earlier in the decade.

IMF ROLE

Juncker, in an interview to be aired on German radio Deutschlandfunk on Sunday, praised Greece for some of the steps it has already taken.

"No country has managed bigger steps to improve competitiveness than Greece," he said.

But the Commission president also said that the bailout program, Greece's third, could fall apart as the IMF has not yet made up its mind whether to take part in providing more aid.

"Yes, it is on a shaky ground in the sense that we don't see how the International Monetary Fund could manage this problem," he said.

The IMF has sat on the sidelines of the latest bailout program and says it cannot participate in a program which could keep Greece in a never-ending cycle of indebtedness that could push national borrowing to 275 percent of economic output by 2060.

Tsipras also accused the IMF, with which Greece has had testy relations since its first bailout in 2010, of being "cowardly," and of coming up with "new demands for Greece".

"Absurd, imaginary unreal, it doesn't matter, as long as it is made to look like Greece is to blame," he said.

Reaching agreement would release another tranche of funds from its latest 86 billion euro bailout, and facilitate Greece making a major 7.2 billion euro debt repayment this summer.

The European and IMF lenders want Greece to make 1.8 billion euros - or 1 percent of GDP - worth of new reforms by 2018 and another 1.8 billion euros after then and the measures would be focused on broadening the tax base and on pension cutbacks.

Representatives of Greece's lenders are expected to return to Athens this week to report on whether Greece has complied with a second batch of reforms agreed under the current bailout.

Reporting by Karolina Tagaris Editing by Jeremy Gaunt

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