ATHENS – Greece and its international lenders are edging closer to completing a review of reforms it has implemented under the terms of its latest bailout, in talks that could unlock more aid, government sources said on Monday.
Debt-laden Athens is hoping that a positive conclusion to the review will unlock up to 5 billion euros more in aid that it needs to cover 3.5 billion euros in repayments to the IMF and the ECB in July as well as unpaid domestic bills.
Officials negotiated into the early hours of Monday morning with the lenders – the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund – and resumed the talks later in the day.
“There are some small details to settle on the fiscal side of things … We are very close,” one government source said, adding that the sides still diverged over pension reforms and regulating non-performing loans.
The review has dragged on for months mainly due to a rift among the lenders over Greece’s projected fiscal shortfall by 2018 – initially forecast by the EU at 3 percent of economic output, 1 percent by Athens and 4.5 percent by the IMF.
All have now agreed to use 3 percent as the baseline scenario in the talks in Athens.
The EU and the IMF are still at odds on whether Athens can achieve a 3.5 percent primary surplus – the budget balance before debt service payments – in 2018, an official participating in the talks told Reuters.
However, the EU’s two economics commissioners sought to play down the divisions on Monday.
“We broadly share the programme objectives and the measures needed to reach the objectives,” Valdis Dombrovskis, the commissioner responsible for the euro, told the European Parliament. “We know there are some differences on assessments, how much effort is needed to reach the fiscal targets … This is bridgeable.”
EU Economics Commissioner Pierre Moscovici told the same forum there were no frictions with the IMF. He said the problem arose because each institution had different calculations for 2015, which meant their estimates for Greece’s spending needs for the 2016 to 2018 period were also different.
Prime Minister Alexis Tsipras accused the IMF on Monday of continuing to insist on the application of wrong policies in Greece despite having admitted to mistakes in the two previous bailouts for the country that it co-financed.
“In Greece wrong policies were applied and it is a paradox that those who recognised that there were wrong policies, admitting their mistake, insist on applying the mistake,” Tsipras said.
The IMF, which will decide whether to co-finance Greece’s third bailout after the review and in light of how much debt relief Greece receives, believes Athens will miss its 2018 surplus target and settle at 1.5 percent, even if it implements measures worth 3 percent of GDP, the official said.
EU institutions believe the target is feasible.
Tsipras, who has a fragile parliamentary majority, is aiming for a compromise before a euro zone finance ministers’ meeting on April 22.
He hopes the conclusion of the review will send a positive signal to markets and lure back investors, while a debt restructuring may help convince the Greek people that their sacrifices are paying off after six years of belt-tightening.