Greece reaches preliminary deal with creditors to pave way for bailout talks

Greece and its foreign creditors reached a deal on a package of bailout-mandated reforms, paving the way for the disbursement of further rescue funds

2 May 2017, 8:03am
After overnight talks, a
After overnight talks, a "preliminary technical agreement" had been achieved
Greece has reached a preliminary deal with its creditors that should pave the way for long-awaited debt relief talks, the Greek finance minister  Euclid Tsakalotos said Tuesday.

"There was white smoke," Tsakalotos told reporters, using a term associated with papal elections.

"The negotiations for a technical deal were concluded on all issues... the way has now been paved for debt relief talks."

Talks on the deal had dragged on for half a year mainly due to a rift between the European Union and the International Monetary Fund over fiscal targets.

Greece and its creditors agreed a third, €86 billion bailout deal in July 2015, but the IMF has so far refused to take part after two prior programmes on the grounds that the targets were unrealistic and Athens’ debt mountain unsustainable.

After overnight talks, Tsakalotos said, a "preliminary technical agreement" had been achieved. Greece now needs to legislate the new measures before Eurozone finance ministers approve the disbursement of loans, money Athens needs to repay €7.5 billion in debt maturing in July. The next scheduled Eurogroup meeting is on 22 May, where reducing Greece's debt will also be discussed.

Tsakalotos added he was “certain” that the agreement would enable Greece to secure debt relief measures from its creditors, which he has said is vital to spearhead recovery in the country's struggling economy.

"There is no excuse of lack of agreement" in the talks, he said.

Under pressure from its creditors, namely the European Union, European Central Bank and the International Monetary Fund, the Greek government agreed earlier this month to adopt another €3.6 billion in cuts in 2019 and 2020.

Athens conceded fresh pension and tax break cuts in return for permission to spend an equivalent sum on poverty relief measures.

A government source on Tuesday said pensions are to be cut by 9% on average, ANA said.

The measures are to be approved by parliament by mid-May.

If Athens outperforms its targets it will be allowed to activate a set of measures offsetting the impact of the additional austerity, which includes mainly lowering taxes.

However, Prime Minister Alexis Tsipras has said he will not apply these cuts without a clear pledge later this month on debt-easing measures for Greece.

Athens also hopes to be finally allowed access to the European Central Bank’s asset purchase programme, known as quantitative easing, or QE, to help its return to bond markets.

Over 10,000 people demonstrated against the cuts on Monday, and a general strike is to be held on 17 May.