April 3, 2016 / 7:22 PM / in a year

Greece, EU/IMF lenders to resume bailout talks amid tension

A Greek flag flutters in the wind as tourists visit the archaeological site of the Acropolis hill in Athens, Greece July 26, 2015. REUTERS/Ronen Zvulun

ATHENS (Reuters) - Greece and its EU/IMF lenders will resume talks on the country’s fiscal and reform progress this week aiming to bridge differences and conclude a key bailout review, which will pave the way for negotiations on long-desired debt relief.

The review has been adjourned twice since February, mainly due to a rift among the lenders over the estimated size of Greece’s fiscal gap by 2018, as well as disagreements with Athens on pension reforms and the management of bad loans.

Inspectors from the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund interrupted the review last month, taking a break for Catholic Easter, government officials said.

Talks are expected to resume on Monday and Athens hopes for a compromise before April 22, when euro zone finance ministers are expected to assess its progress.

The IMF is expected to decide whether to co-finance Greece’s third bailout after the review and in light of how much debt relief Greece receives.

Holding a fragile parliamentary majority, Prime Minister Alexis Tsipras hopes a debt restructuring will convince Greeks that their sacrifices are paying off after six years of belt-tightening. But the delays have cast a shadow on his plans.

Adding to growing tension, Internet whistleblowing site WikiLeaks published on Saturday what it said was the transcript of a March 19 conference call of three senior IMF officials discussing tactics to apply pressure on Greece, Germany and the EU to reach a deal in April.

The officials were quoted as discussing a threat that the Fund might not participate in Greece’s third bailout program as a way to force EU creditors, especially Germany, to reach a deal on debt relief before Britain’s June referendum on whether to stay in the European Union.

An IMF spokesman in Washington said the Fund did not comment on “leaks or supposed reports of internal discussions” but added that the IMF had made its position known in public.

The Greek government interpreted the leak as revealing an IMF effort to blackmail Athens with a possible credit event to force it to give in on pension cuts which it has rejected. Tsipras’s office said he had asked IMF Managing Director Christine Lagarde to clarify the Fund’s stance.

Talks on Monday will focus on measures needed to plug an estimated fiscal gap of 3 percent of GDP by 2018, according to government officials and sources close to the lenders. The IMF initially put the figure at 4.5 percent and Athens at 1 percent.

Athens aims to save one percentage point from cutting pension spending, another point from raising income tax on high income earners and 1 percent of GDP from tax measures, which have not yet been agreed. It is also considering raising fuel tax and value-added tax on cigarettes, among other measures.

If concluded the review will unlock a new tranche of about 5 billion euros ($5.7 billion), which Athens needs to pay state arrears and ECB and IMF maturing debt. Greece has no major debt redemptions until July.

($1 = 0.8782 euros)

Reporting by Lefteris Papadimas and Renee Maltezou; editing by Susan Thomas

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