Eurozone presses Greece on reforms as recession forecast to drag on

GMT 07:39 2015 Tuesday ,06 October

Arab Today, arab today Eurozone presses Greece on reforms as recession forecast to drag on

Greek PM Alexis Tsipras
Luxembourg - AFP

Eurozone finance ministers on Monday urged Athens to swiftly implement the tough reforms at heart of its huge bailout as new forecasts showed Greece's economy stuck in recession well into 2016.

Meeting in Luxembourg for the first time since Tsipras was reelected in snap elections on September 20, eurozone finance chiefs agreed on a list of reforms to be swiftly implemented by Athens in order to unlock a slice of its huge 86-billion-euro ($96-billion) EU bailout.

The finalising of the list came as Athens unveiled a draft budget which showed a recovery only kicking in in the third quarter of 2016.

The forecast shows output contracting by 1.3 percent for the whole of 2016, after a 2.3-percent drop in 2015.

"Restoring economic stability and the public debt is one of our main objectives, to be freed from the oversight" of international creditors, Prime Minister Alexis Tsipras told parliament, which sat Monday evening for the first time since September 20 polls.

"A lot of work will have to be done in the coming months so it is very important to maintain that very stong reform momentum," said Eurogroup Jeroen Dijsselbloem, head of the Eurogroup of finance ministers following the Luxembourg talks.

He said ministers had approved a list of reforms, which he hoped would be implemented before mid-October in order to unlock two billion euros in bailout loans.

It was in Greece's interest "to deliver as quickly as possible so we can also continue on the process of bank recapitalisation and go into the debate about debt restructuring," he said.

Debt restructuring is a key demand of Athens.

- 'No alternative'-

The draft budget presented to parliament Monday showed Athens achieving a primary budget surplus, (excluding the cost of debt servicing) of 0.5 percent of GDP in 2016.

"There is no alternative to fulfilling the commitments that have been taken with the European Union," said Pierre Moscovici, the European Commission's top economic official.

Greece's three-year rescue package came after six months of acrimonious negotiations with its eurozone partners that pushed Athens to the cusp of a humiliating eviction from the single currency.

"Difficult decisions lie ahead," Tsipras warned on Saturday ahead of a crucial week which will include a vote of confidence vote in parliament on Wednesday.

On returning to office, Tsipras pledged to "quickly implement" the bailout terms. He has also promised to win debt forgiveness, which Greece's eurozone partners have accepted in principle.

The first review of whether Athens is abiding by the strict bailout programme is due later this month.

- Delayed review? -

Several European sources told AFP the review would be delayed, but this was not seen as an immediate issue, ministers said.

"There were just elections, the government has just been formed, it's too early to talk about being late," said Wolfgang Schaeuble, Germany's influential finance minister.

The bailout includes provisions deeply opposed by Greeks such as reforming state pensions, tax increases on farmers and privatisations of cherished state companies.

A European source said the recapitalisation of Greece's banks would be handled separately from the toughest part of the bailout review.

Up to 25 billion euros of Greece's bailout are earmarked for the recapitalisation of the banking sector after a weeks-long shut down at the height of Greece's debt crisis.

Of this, 10 billion euros is immediately available to be injected into the financial system once the European Central Bank has assessed the fallout of bank closures suffered by Greece at the height of the crisis this summer.

The so-called bank recap would take place in the next weeks in return for financial sector reforms that are not considered controversial, the European source said.

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