Greece, lenders start talks on reform compliance

Greece and its international lenders started talks on Wednesday to assess its compliance with an 86 billion euro ($98 billion) bailout deal, as dissent stirred over tax hikes and pension reforms.

Team leaders from three European institutions and the International Monetary Fund are reviewing reforms Athens adopted on Oct. 16, and future 'milestones' Greece must pass soon to be eligible for a payment of 3 billion euros.

The amount is part of an initial loan tranche of 23 billion euros, which includes 10 billion already disbursed to Greece and 10 billion set aside to cover bank recapitalisation costs.

Fiscal and pension reforms and recapitalising Greece's banks were on the agenda, a Greek government official said, as delegations met at a central Athens hotel.

"It was a preparatory meeting to decide how and what we will discuss in our meetings," Finance Minister Euclid Tsakalotos told journalists after a brief encounter early on Wednesday. Talks would continue throughout the day.

The left-wing government has passed legislation raising the retirement age, increasing healthcare contributions, scrapping most early retirement benefits, and clamping down on tax evasion.

The next phase includes taxing farmers, raising tax for private education and merging pension funds, which is likely to mean further cutbacks.

Civil servants and private sector workers have called a nationwide strike for Nov. 12, the first signs of mass dissent since Prime Minister Alexis Tsipras's Syriza government was elected in January. On Wednesday, dozens of paraplegics demonstrated outside parliament demanding exemption from any cutbacks.

Labour Minister George Katrougalos said pension reform meant a streamlined and simplified system.

"A basic element will be a national pension for all, funded through taxation. We estimate the burden for the national pension will be 7 per cent of GDP (gross domestic product), now it is 9.5 per cent of GDP," he told Antenna Television.

Athens wants the review concluded within the next month and the capital boost for its banks by year end so it can start debt relief talks.

About 40 billion euros of capital left Greek banks between last December and the imposition of capital controls in June. They also carry a mountain of non-performing loans after years of recession and high unemployment.

But the recession this year is expected to be shallower than initially forecast, with officials expecting a drop in output of 1.4 per cent from earlier estimates of 2.3 per cent, sources said on Wednesday.

Sources close to bailout talks said that the lenders had agreed with the new projection. The estimate for a 1.3 per cent drop in output for next year remains.

Authorities anticipate more tourism income and less impact from capital controls than previously estimated. ($1 = 0.8809 euros)

COMMENT NOW