Greece, lenders seek deal as bailout talks resume in Athens

[April 25, 2017]  By Renee Maltezou

ATHENS (Reuters) - Greece and its foreign creditors resume talks on Tuesday on reforms prescribed under the international bailout and further debt relief, aiming to reach a comprehensive deal before a meeting of euro zone finance ministers on May 22.

Talks over reforms in the energy and labor market and on pension cuts and income tax have dragged on for months mainly due to differences between EU lenders and the International Monetary Fund over fiscal targets.

The leftist-led government and the lenders reached a deal this month in Malta on key elements of reforms worth 2 percent of gross domestic product which the country has agreed to legislate now but implement in 2019 and 2020.

Greece will implement more austerity after the bailout expires in 2018, to convince the IMF to participate in an 86-billion euro bailout package, the third rescue plan since the debt crisis broke out in 2010.

The talks, at a central Athens hotel, will focus on Tuesday on energy reforms and a privatization fund.

Greece attained a 4.2 percent of GDP primary surplus last year, significantly above the target set in its bailout. But the IMF says the country cannot maintain high fiscal surpluses and wants assurances from euro zone governments that Greek debt will be made sustainable, before the Fund will join the bailout.

A Greek presidential guard performs a ceremonial march at the Tomb of the Unknown Soldier in front of the parliament building in Athens, Greece, September 15, 2015. REUTERS/Paul Hanna/File Photo

The IMF participation issue has overshadowed the reform progress. It is key for Germany which faces elections in September and wants to add credibility to the bailout but it is also crucial for Prime Minister Alexis Tsipras who seeks further debt relief.

Athens and its lenders are also discussing a set of measures offsetting the impact of the austerity in 2019 and 2020, on condition that Athens outperforms its targets. These measures include reducing taxes.

Concluding the review of Greece's progress will unlock funds which Athens needs to repay loans maturing in July.

It will also allow the country to be included in the European Central Bank's quantitative easing program and help it return to bond markets before the bailout ends. Tsipras, who is sagging in opinion polls, faces national elections in 2019.

(Editing by Robin Pomeroy)

[© 2017 Thomson Reuters. All rights reserved.]

Copyright 2017 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.