ATHENS (Reuters) - Greece reached an agreement with its lenders on financial reforms early on Tuesday, removing a major obstacle holding up fresh bailout loans for the cash-starved country.
Athens signed up to a new aid program worth up to 86 billion euros ($92 billion) earlier this summer, but payment of part of an initial tranche had been held up over disagreement on regulations on home foreclosures and handling tax arrears owed to the state.
After weeks of talks between the government and representatives from the European Union and International Monetary Fund, a deal was reached overnight over a first set of demanded reforms, Finance Minister Euclid Tsakalotos said.
“It was a difficult negotiation,” Tsakalotos said. “Over the summer the pressure to reach a deal came from the specter of Grexit, this time it was the need to recapitalize banks,” he said.
“The agreement covers all 48 demanded reforms and some extra milestones on financial issues.”
Tsakalotos said the agreement meant Greece’s parliament could ratify the reforms into law on Thursday, and that deputy euro zone finance ministers, known as the Euro Working Group, could endorse the deal on Friday.
That would allow the disbursement of 2 billion euros ($2.15 billion) in cash for the state to pay its own arrears and another 10 billion euros to help fill a 14.4 billion euro capital hole at the four main banks.
The head of the euro zone finance ministers, Jeroen Dijsselbloem, said Greece’s European creditors stood ready “to support the disbursement” once parliament approves the reforms.
“This is a good day,” the EU’s Economics Commissioner, Pierre Moscovici, told a news conference in Brussels.
Prime Minister Alexis Tsipras’ leftist government is keen to complete the first review under the new bailout package, Greece’s third since 2010, so it can start talks with lenders on debt relief. Tsipras is hoping to begin the debt negotiations before year-end.
The review had previously stalled on disagreement over the level of protection for primary residences of homeowners unable to pay their mortgages, the repayment of tax and pension fund arrears and revenues from value-added tax.
Athens said the deal reached overnight provided foreclosure protection for primary homes for about 60 percent of mortgages among an estimated 400,000 homeowners whose loans had soured.
About a quarter of them - families with incomes below the poverty line - were accorded full protection from foreclosure. The rest were given protection for a three-year period provided they restructured their debts with their banks.
The two sides also agreed to introduce a new gambling tax, which will affect Greece’s biggest betting company OPAP (OPAr.AT), to replace an unpopular value added tax on education.
Talks continued over how much the new tax would raise. More negotiations will take place in Athens until Friday over a second set of reforms that include changes to the pension system and income tax.
($1 = 0.9394 euros)
Reporting by Renee Maltezou; Writing by Michele Kambas; Editing by Ruth Pitchford