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Greece's creditors get back in the game

Debt-laden Greece has edged closer to receiving fresh money through a third 'rescue package,' after eurozone finance ministers agreed to resume a review of Athens' reform program. But time is running short.

Following talks in Brussels on Monday, finance ministers of the 19-nation eurozone agreed that negotiations over Greece's bailout review would resume next week. Their aim is to conclude an assessment of the debt-laden country's progress on economic governance reforms "within a few days."

Sufficient progress on those reforms is the condition set by creditor countries for further financial support of the Greek government. 

Jeroen Dijssebloem, the head of the eurozone finance ministers, also known as the Eurogroup, said officials representing the lenders would return to Athens shortly for talks on new measures.

"I'm very happy with that outcome today," Dijsselbloem told a press conference. "They will work with the Greek authorities on an additional package of structural reforms of the tax system, pension system, and labor market regulation." 

No more austerity

Greece's creditors, including the European Commission, the EU rescue fund, and the International Monetary Fund (IMF), have been locked in a months-long standoff over debt relief and budget targets.

Talks on whether Athens should receive the third installment of a 86-billion-euro ($91-billion) bailout - brokered in mid 2015 and its third rescue overall - also stalled over delays in Greek reforms, and disagreements among lenders on whether the IMF would participate in the program.

A Greek government official told the news agency AFP that Monday's agreement included "the inviolable condition… [set by Greece] for not even one euro more of austerity."

In return, Athens had accepted its creditors' demands that it must legislate a sweeping set of reforms and implement them from Jan. 1, 2019 onwards, on condition that their fiscal impact would be neutral, according to the Greek official, who spoke to AFP on condition of anonymity.

The Greek government needs the tranche to be paid out in the coming months in order to refinance seven billion euros in debt by July of this year.

IMF on board?

The Greek official did not refer to the possibility of the IMF being part of the bailout. But German finance minister Wolfgang Schäuble said he was confident the global crisis lender would continue to participate in the bailout.

"The idea of having a bailout package without the IMF is theoretical at this point," Schäuble said ahead of the meeting, adding "the institutions now have a common position."

The Europeans have been at loggerheads with the IMF over the fund's demands for easier budget targets and for Athens' mountain of debt to be reduced. The IMF insists that a primary surplus of 3.5 percent is too ambitious. That's the size of the government budget surplus demanded by Greece's other creditors before debt servicing costs are added in.

In effect, this means that Greece will be taking in more tax revenues from its citizens than it spends back into the economy, by an amount equivalent to 3.5 percent of the country's total production of goods and services. The difference will be transferred to its creditors outside the country. 

The measures imposed on Greece must still be approved by the parliament in Athens, most likely in mid-March, a step that has caused problems in previous deals.

Watch video 01:53

Greece not out of the woods yet

uhe/nz (Reuters, AFP)

 

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