Lenders press Greece on reforms before aid flows

ATHENS- Reuters

A woman speaks on her phone in front of a Greek bank’s adverting banner with ancient coins in Athens earlier this month. AP photo

The European Union and IMF want Greece to push through more budget cuts and implement a series of long-agreed austerity reforms before they agree on a new bailout the country needs to avert bankruptcy, a report obtained by Reuters shows.

All eyes have been on Athens’ tortuous debt swap talks with its private creditors over the past week, but Greece also needs to convince its eurozone partners and the International Monetary Fund to release a 130-billion euro package if it is to avoid a chaotic default.

Athens’ partners have grown increasingly exasperated with its repeated fiscal slippages and delays on reforms and want to see progress before they wrap up Greece’s second multi-billion euro bailout in three years.

The EU, IMF and ECB lenders - known as the troika - have drawn up a report this week which includes a list of measures they want to see enacted by Athens.

Top of the list is passing a supplementary budget with more cuts to reach fiscal targets in 2012. The troika suggests large spending cuts in defence and health spending as well as cutting redundant state entities. The document does not specify the amount of cuts needed.

The EU and IMF are also pressing Greece to adopt a much-delayed reform of supplementary pensions, ensure that a plan to replace only 1 out of 5 civil servants leaving the workforce is enacted and want Greece to finalise the opening up of its many closed professions such as lawyers and pharmacists, which they have been demanding for years, the document shows.

They also want the Bank of Greece to complete its assessment of Greek banks’ capital shortfall and they expect the government to enact legslation to improve wage flexibility and further liberalise product and service markets, the document says.

The list of measures is not final and could change after discussions with the Greek authorities, the document says.

Government spokesman Pantelis Kapsis said the government would try to negotiate some of the points on the list but repeated that Athens needed the bailout loan to stay afloat.

“It’s obvious, if we don’t get the loan, how are we going to find the money?”, Kapsis told Skai TV in response to a question on whether Greece would default without the aid. “This is not what we will finally pass, we should keep that in mind. It’s a list by the troika that opens up all those issues ... Some of them are past obligations, some are up for negotiation.”

Talks with EU, IMF and ECB inspectors on the new bailout program are expected to go well into next week, sources close to the talks say, with slow process so far on fleshing out reforms required by the lenders on areas such as cutting the public sector workforce and making wage rules in the public and private sector more flexible.

Looming elections are distracting senior Greek officials and politicians from enacting the unpopular austerity reforms.

Greece’s co-ruling conservative New Democracy party wants snap elections as a new bailout deal is clinched and no later than April 8.

Greece and its private creditors made progress on Jan. 26 in talks on restructuring its debt, both sides said, and they will continue negotiating on Friday with the aim of sealing an agreement within a few days.