Greece nears deal on bailout review

Greece is likely to reach a deal with foreign lenders on its latest bailout review before a meeting of euro zone finance ministers today to decide on further aid, EU and Greek officials said yesterday.

Athens has been in talks with inspectors from the European Union, European Central Bank and International Monetary Fund troika for nearly a week to show it can deliver on its pledges after failing to meet public sector reform targets.

Greece hopes euro zone finance ministers will free up its next €8.1 billion tranche of aid when they meet today because it needs part of the money to redeem about €2.2 billion of bonds in August.

Bailed out twice by its foreign lenders, Greece relies on foreign aid to keep afloat. Failure to conclude its bailout review successfully could push it close to bankruptcy again, triggering a new upsurge in the euro zone crisis.

'Very good progress'
"We made very good progress," Poul Thomsen, head of the IMF's mission to Greece said yesterday, adding that he hoped talks would be concluded early today before the finance ministers' meeting.

Greek finance minister Yannis Stournaras also said he was optimistic of a deal this morning. The two sides were due to leave Athens yesterday but could remain in touch to nail down final details.

The latest loan instalment is one of the last big cash injections Greece stands to get as part of a €240 billion rescue package that expires at the end of 2014.

EU economic and monetary affairs commissioner Olli Rehn, speaking in France, said the negotiations were almost complete, but that Athens needed to intensify efforts to deliver on reform commitments.

He reiterated that aid for Greece could be split into instalments.

Lenders have become increasingly frustrated with Greece’s slow pace of shrinking the civil service and making it more efficient and less corrupt.

Talks with the troika stumbled last week over a missed June deadline to put 12,500 state workers into a “mobility scheme” under which they are transferred or laid off within a year, but an agreement was finally reached on Saturday.

The talks continued as Bundesbank chief Jens Weidmann said the ECB cannot solve the euro zone crisis.

Addressing an economists’ conference in France three days after the ECB broke with precedent by declaring it intended to keep interest rates at record lows for an extended period and may yet cut further, Mr Weidmann pressed the bloc’s governments to get their economies in shape and tighten their fiscal rules.

“Monetary policy has already done a lot to absorb the economic consequences of the crisis, but it cannot solve the crisis,” he said.

“This is the consensus of the [ECB] governing council. The crisis has laid bare structural shortcomings. As such, they require structural solutions.” – (Reuters)