Lenders say Greece makes reform progress

BRUSSELS Thu Mar 14, 2013 6:14am EDT

People walk at Monastiraki square in central Athens January 3, 2013. REUTERS/John Kolesidis

People walk at Monastiraki square in central Athens January 3, 2013.

Credit: Reuters/John Kolesidis

BRUSSELS (Reuters) - Greece is doing well with reforms required to receive the next tranche of emergency loans but is not there yet, international lenders said on Thursday.

Representatives of the International Monetary Fund, the European Commission and the European Central Bank were commenting after a visit to Athens. They said they would return to Greece in early April to continue their review.

"Significant progress has been made but a few issues remain outstanding," the statement said.

"As additional technical work will be necessary to settle these issues, the mission will take a short break to allow this work to be completed."

Greece is getting its first review after lenders agreed to unlock almost 50 billion euros in aid in December, staving off bankruptcy and keeping it in the euro. In return, Athens passed a new round of austerity measures to prop up its finances.

At the end of the troika's 10-day visit, Finance Minister Yannis Stournaras said he was confident that Athens would get a 2.8 billion euro aid tranche it is waiting on this month, despite the interruption in talks.

Kept afloat solely by foreign aid, Greece has received more than 200 billion euros in loans since May 2010 but questions remain about whether it can continue implementing the ambitious reform program in the face of public anger against the measures.

In addition to unpopular wage cuts and tax rises it has already agreed, Athens also needs to sack "a large part" of 27,000 civil servants it must earmark for possible dismissal.

To secure the March tranche, Athens needs to present a detailed staffing plan spelling out which ministries the workers will come from and how many of those will be laid off.

A deeply sensitive issue in a country where six years of recession have sent unemployment to the highest level in generations, Athens is keen to avoid public sector layoffs but has denied speculation that cutting its bloated public sector were a sticking point in talks with the troika.

Another contentious issue concerns terms and deadlines for a 50-billion-euro recapitalization of banks, which risk being nationalized if they fail to complete the process in time and seek a softening of terms.

(Reporting By Jan Strupczewski. Writing by Karolina Tagaris. Editing by Jeremy Gaunt.)

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