International lenders agreed Friday Greece should prepare a package of over 3 billion euros (3.37 billion U.S. dollars) in additional measures to guarantee it will reach fiscal targets to conclude the bailout reform review.
"We came to the conclusion that the policy package should include a contingent package of additional measures that would be implemented, only if necessary, to reach the primary surplus target for 2018," Jeroen Dijsselbloem, head of the Eurogroup told a news conference following a meeting of eurozone finance ministers.
The contingency measures need "to be credible, legislated up-front, automatic, and based on objective factors which will trigger those measures," said Dijsselbloem.
Depending on the progress achieved by Athens on the contingency package, the Eurogroup will decide whether to meet again next Thursday to discuss the proposed measures and reach "a political agreement," added the Dutch finance minister. A political agreement is needed for the release of a new bailout tranche to Greece and the start of a much-anticipated discussion on debt relief for Athens.
For Greek finance minister Euclid Tsakalotos who attended the Eurogroup meeting, there is no possibility within Greek law to legislate for contingencies for something that might or might not happen in the future. But Greece would engage with its lenders to find "a commitment mechanism" on measures so that credibility and trust is achieved, he told journalists following the meeting.
The main package of measures to be implemented over the coming three years, which is almost complete, is worth 3 percent of Greece's gross domestic product (5.4 billion euros), while the contingency measures will be worth 2 percent of the gross domestic product (GDP), the Eurogroup chief estimated.
Greece has to reach a primary surplus target of 3.5 percent of GDP in 2018, but the IMF believes Greece would only reach a primary surplus target of 1.5 percent of GDP with current reforms.
International Monetary Fund (IMF) managing director Christine Lagarde, who took part in the Eurogroup meeting, said the overall package for Greece's debt crisis was standing on its own two feet vis-a-vis the implementation of measures and debt sustainability. The Washington-based IMF has been demanding debt relief as a precondition for its involvement in the third Greek bailout program worth up to 86 billion euros.
The IMF and Greece's European lenders have been deeply divided about the question of debt sustainability for Greece, with a number of eurozone countries wary of granting significant debt relief measures to the bailout country.
According to Dijsselbloem, Eurogroup ministers will also have a serious conversation about a debt relief package for Greece. But "there is no support for nominal haircuts on the debt," he said, referring to the positions held by the Eurogroup's finance ministers.
The primary balance is a key indicator to assess Greece's progress in its third international financial rescue. Greece had a primary surplus last year that beat the target set in its bailout program, according to the European Commission, the European Union's executive arm.
Athens recorded a primary surplus -- which excludes debt servicing costs -- of 0.7 percent of gross domestic product in 2015, which is in line with the Commission baseline and substantially better than the program's fiscal target of a primary deficit of 0.25 percent of GDP for 2015.
Lagarde welcomed Eurostat's data on Greece's public finances, saying it was more positive than what IMF expected, which might mean the IMF will have to rethink its calculations, but she warned that Eurostat could revise its data in the future.
Options such as extending maturities could be enough to make Greece's debt sustainable, and Greece "will probably require a re-profiling of the debt using multiple mechanisms," Lagarde added. "But this would be triggered when needed."
Debt relief would be discussed upon completion of all the measures that are being discussed, she said, and based on realistic forecasts.