Latest rift in Greek bailout talks dashes hopes for deal in Malta

Greek Prime Minister Alexis Tsipras speaks during a meeting organized in view of the EU 60th anniversary celebrations, in Rome, Italy, 23 March 2017. [Alessandro Di Meo/EPA]

A new rift between Athens and the International Monetary Fund over pensions and labour reforms has dealt a blow to an initial accord, dashing hopes for a bailout review deal before a meeting of eurozone finance ministers this week.

Talks between Athens, the European Union and the Washington-based IMF have dragged on for months due to differences over Greece’s fiscal progress, labour and energy market reforms. The delays have revived fears of a new crisis in Europe, which is already reeling from Britain’s decision to exit the EU.

Sources close to the talks said Greece and its creditors had reached an initial agreement on the main issues of the bailout review in Brussels last week but they hit a last-minute snag.

Prime Minister Alexis Tsipras’ leftist-led government, which has been sliding in opinion polls, pulled back on the timing of agreed pension cuts, one source said. This prompted the IMF to seek a renegotiation on labour reforms, another source said.

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A third source said “there were objections (to the deal), which did not come directly from the institutions involved in the talks”, without elaborating.

EU/IMF mission chiefs were initially expected to return to Athens to sort out the details before a meeting of euro zone finance ministers in Malta on Friday.

“An agreement had been reached on the main parts in Brussels but then there was a breakdown,” one of the sources said.

More austerity

Athens agreed in February to take more austerity measures to convince the IMF to participate in its current bailout programme, as sought by many EU countries facing national elections this year. The move helped speed up the negotiations which continued in Athens and Brussels.

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The agreed measures, worth 2% of gross domestic product, included lowering the tax-free threshold to about €6,000 and cutting pension spending – one of the highest in the eurozone – in 2019, a year after Greece’s bailout expires.

Athens had won over some concessions on labour reforms, a key demand by the IMF, which has not yet decided if it will participate in the country’s third bailout programme.

Alternate Foreign Affairs Minister George Katrougalos told Skai radio the IMF wanted more concessions from the Greek side.

“Although there was a done deal, following concessions from both sides … they are asking for more,” he said, adding that the latest demands concerned labour reforms.

The Commission said on Friday (30 March) there was no fixed date for the mission chiefs’ return. Talks continue via teleconference.

If concluded the review will unlock vital bailout funds. Greece faces big debt repayments in July and needs the cash.

“Building on progress already made in talks, the institutions are continuing consultations from headquarters,” said Commission spokesman Margaritis Schinas on Monday. “The aim is to lay the ground for the conclusion of the second review as soon as possible.”

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