ATHENS Greece and its international creditors moved closer to a deal on drastically downsizing Hellenic Defense Systems (EAS) after lengthy talks on Sunday but remain at loggerheads over lifting restrictions on home foreclosures, Greek officials said.
Striking a deal on EAS, which is almost entirely owned by the Greek state, would unlock the disbursement of a one-billion euro aid tranche from the country's bailout. Athens has resisted a complete shutdown of the arms manufacturer.
Chief inspectors from the European Union, European Central Bank and International Monetary Fund - the troika - are conducting a bailout performance review before the remaining bailout funds can be released.
The review has been interrupted twice since September due to the reluctance of Greece's fragile, austerity-battered coalition government to adopt any more unpopular measures to satisfy its lenders.
"We made significant steps forward and hope to be able to conclude on EAS tomorrow," a senior government official told reporters, declining to be named.
Lenders have been pressing Athens to restructure or liquidate loss-making state firms including EAS to cap their fiscal costs on the budget. A new meeting could be held on Monday, the official said.
"The troika will assess our proposals and send a compliance report to the euro working group ahead of Tuesday's Eurogroup meeting of finance ministers," another senior official said.
But talks on lifting restrictions on home foreclosures to allow banks to recover bad loans produced no progress, with both sides unable to bridge differences after meetings on Saturday and Sunday, the officials said.
"We are stuck," one of the officials said.
International lenders, worried about a deteriorating repayment culture and rising bad loans for banks, have urged Athens to improve insolvency laws to help clear delinquent household debt, including lifting a ban on primary home foreclosures.
Lifting the freeze on forced auctions, which is due to expire on December 31, has provoked stiff opposition from lawmakers who want to extend the measure and fear a backlash from Greek voters.
Greece's depressed economy, pay cuts, higher taxes and an unemployment rate of nearly 28 percent have taken a toll on household budgets, making it hard for many homeowners to keep up with their loan payments.
(Editing by Sonya Hepinstall)