Greek creditors say agreement on reforms reached

Greek economic outlook remains uncertain despite reform agreement, international creditors say

Associated Press
Greek creditors say agreement on reforms reached
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Municipal police officers gather outside the offices of the Union of Greek Municipalities during an assembly of Mayors in Athens on Sunday July 7, 2013. The municipal officers, frequently used for traffic warden duty and to check street vendors' licenses, staged the protest following reports they would be included in an involuntary staff transfer scheme. (AP Photo/Kostas Tsironis)

BRUSSELS (AP) -- Greece's international debt inspectors reached a tentative agreement Monday with the cash-strapped country on reforms needed to keep releasing vital bailout loans, although they warned it still faced an "uncertain" economic outlook and needed to sack thousands of state sector workers.

While the country's creditors noted that progress has been made in some sectors, they said more needs to be done — particularly in trimming the size of bloated civil service. They added that the Greek authorities have "committed to take corrective action" to get the austerity process back on track.

The latest review of Greece's economy by the European Commission, European Central Bank and International Monetary Fund, known as the troika, will be presented at Monday's meeting in Brussels of the finance ministers of the 17 euro countries. They have to approve the next payment of Greece's bailout loan.

As he arrived at the meeting, French Finance Minister Pierre Moscovici said he thought Greece would get the green light and could get its money as soon as the end of the month.

Even Germany's finance minister, Wolfgang Schaeuble, who generally drives a hard bargain at these meetings, struck a positive note.

"I am confident that we will take another step today and that we won't have any kind of dramatic crises in Greece also in the coming months," he told reporters. "It will remain a difficult road for Greece, there I would warn against any illusion."

The exact amount to be disbursed remains unclear. Finance Minister Yannis Stournaras had said in June that the installment was expected to be as high as 8.1 billion euros ($10.41 billion). But by Monday afternoon that appeared unlikely.

After years of fiscal mismanagement and overspending, Greece has been relying on its bailout funds for the past three years. In return, the government has pledged to overhaul its economy. Without the payments — some 240 billion euros in total — the country could go bankrupt and potentially be forced out of the eurozone.

Hammered by a financial crisis since late 2009 and in the sixth year of a deep recession, the troika said Greece's reform program remained "broadly in line" with projections. It also laid out the hope of a gradual return to growth next year.

However, it added that "the outlook remains uncertain."

The troika said "policy implementation is behind in some areas" and that the Greek authorities have said they will do more to ensure delivery of the fiscal targets for 2013-14, noting in particular efforts to restrict overspending in the health sector.

The government has also "committed to take steps to bring public administration reforms back on track," including reducing the number of civil servants, one of the measures that has been among the most contentious — and delayed — in Greece's reform program.

"Firing civil servants is always difficult, that is difficult in every country, certainly in such economic circumstances," said Jeroen Dijsselbloem, who is head of the Eurogroup meeting and Dutch finance minister.

The government must put 12,500 civil servants on administrative leave by the end of 2013, with the possibility of dismissal. They include 2,200 school security personnel, 3,500 members of the Athens municipal police, which will be disbanded and most of its members absorbed into Greece's police force, at least 2,000 local government employees, 1,500 teachers and employees of various ministries.

They will be paid 75 percent of their normal salary and be subject to dismissal if they aren't transferred to other state agencies within eight months.

Municipal workers across the country went on strike to protest the plan, while the country's civil servants union, ADEDY, called a work stoppage from noon for all civil servants in the capital, Athens.

The austerity reforms agreed in return for the loans, have included big salary and pension cuts as well as repeated tax hikes. This has left the economy mired in the sixth year of a deep recession, with unemployment spiraling to above 27 percent.

A public backlash has seen frequent violent protests and repeated political crises that have led to four different Greek governments in less than four years. The current government is an uneasy coalition between the Prime Minister Antonis Samaras' conservatives and formerly rival socialists.

"Politicial unrest, instability, change of coalition: it always contributes to delays in decision making, that the process takes too long," Dijsselbloem said. "Political stability is almost the first condition for a country to get out of a crisis."

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Becatoros reported from Athens, Greece. Raf Casert in Brussels contributed to this report.

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