Euro zone, IMF agree on a common stance on Greece: official

10/2/2017

By Jan Strupczewski

Euro zone lenders and the International Monetary Fund have reached agreed between themselves to present a common stance to Greece later on Friday in talks on reforms and the fiscal path Athens must take, euro zone officials said.

Such a united stance would be a breakthrough because the two groups have differed for months on the size of the primary surplus Greece should reach in 2018 and maintain for years later as well as the issue of debt relief.

Those differences have hindered efforts to unlock further funding for Greece under its latest euro zone bailout program.

"There is agreement to present a united front to the Greeks," a senior euro zone official said, adding that the outcome of Friday's meeting with the Greeks was still unclear and it was unclear if Athens would accept the proposals.

"What comes out of it, we will see," the official said.

Financial markets took heart from the news, however. Greece's two-year bond yield fell almost 50 basis points to 9.55 percent. It hit the 10 percent mark on Thursday as worries about the bailout drove away buyers.

The chairman of euro zone finance ministers, Jeroen Dijsselbloem, said in The Hague that Friday's meeting, in which Greek Finance Minister Euclid Tsakalotos will take part, was to discuss the size of Greece's primary surplus.

The euro zone wants Greece to reach a primary surplus - which excludes interest repayments on debt - of 3.5 percent of gross domestic product and keep it there for many years.

But the IMF believes that with reforms in place now Greece will reach only 1.5 percent next year and in the following years and has therefore been pushing for Athens to legislate new measures that would safeguard the agreed euro zone targets.

Officials said the lenders would ask Greece to take 1.8 billion euros worth of new measures until 2018 and another 1.8 billion after 2018, focused on broadening the tax base and on pension cutbacks.

The Greek government, initially elected to fight against lend-imposed austerity, is loathe to make more cuts that will hit its battered citizens.

A united stance among euro zone governments and the IMF is a breakthrough because they have differed for months on the size of the primary surplus Greece should reach in 2018 and maintain for years later as well as the issue of debt relief.

Those differences have hindered efforts to unlock further funding for Greece under its latest euro zone bailout program.

Another euro zone official described the meeting as "important" and having the potential to break the stalemate that has blocked the signing off by lenders on a batch of Greek reforms and therefore the disbursement of loans to Athens.

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