Bloomberg News

Greece Clinches Accord With Troika, Paving Way to Aid Payment

April 15, 2013

Greece’s government and international creditors reached an agreement on conditions related to the next payment of aid, including firing state workers.

“The mission has reached staff-level agreement with the authorities on the economic and financial policies needed to ensure the program remains on track,” according to a joint statement by the so-called troika comprised of the European Commission, the European Central Bank and the International Monetary Fund. “The recent steps taken by the authorities suggest that the March milestones are likely to be achieved in the near future.” The term “milestones” refers to terms Greece must meet to unlock loan installments.

Greece has been locked in talks with international creditors in Athens for more than a month on meeting targets linked to receiving further bailout payments, including shrinking the government workforce. The statement today said the disbursement of 2.8 billion euros ($3.7 billion) remaining from the previous review could be agreed “soon” by the euro-area member states.

Finance Minister Yannis Stournaras said today that the agreement included dismissals for “several thousand” public- sector employees, which will allow the country to hire younger, more qualified employees in their place. He said that 200,000 people left the Greek state sector between 2009 and 2012.

Attrition Rule

Identifying redundant positions and putting in place a system that will lead to mandatory exits for about 150,000 civil servants by 2015 is a so-called milestone for further aid payments.

Prime Minister Antonis Samaras said today his government had agreed to fire 15,000 state employees by the end of 2014 and that of these, 4,000 would be replaced by younger staff.

Poul Thomsen, the lead IMF negotiator on the Greek program, said he was pleased at an agreement that would bring in younger staff. He added that firing in the public sector remained a “taboo.”

More than three years after revealing that Greece had misled its euro partners on the state of its finances, the nation remains reliant on loans from the euro area and the IMF to pay pensions and wages. To qualify for payments from the total of 240 billion euros pledged to the country, it has to continue meeting economic targets, including reducing staff levels.

Budget Targets

Euro-area finance ministers revamped the country’s second aid program in November, giving Samaras two extra years until 2016 to meet budget-reduction targets after he forged a coalition government following two elections that jeopardized the country’s survival as a euro member.

Stournaras said the nation was focused on producing a primary surplus this year that will allow it to pitch for a “drastic” reduction in debt he said is promised under the November accord.

Euro-area finance ministers said at the time they would consider further measures and assistance, including lowering rates on loans to Greece, if the country’s government stuck to its pledges.

The economic outlook for the country is “largely unchanged” from the previous review and a recovery could take hold next year after six years of recession, according to the troika statement. Debt sustainability “remains on track,” it said.

Locked out of the markets since April 2010, Greece is the only nation to receive two bailout packages from the euro area and the IMF as public opposition to pension and wage cuts derailed the pace of promised economic reforms.

Euro-region finance chiefs agreed in December to pay Greece 49.1 billion euros through March after revamping the second rescue. Greece received 34.3 billion euros in December, including funds for its banks, and 9.2 billion euros in January. It was due to get about 5.6 billion euros in two separate payments in February and March. The IMF is contributing a separate amount to Greece of about 3 billion euros this quarter.

To contact the reporters on this story: Tom Stoukas in Athens at astoukas@bloomberg.net; Paul Tugwell in Athens at ptugwell1@bloomberg.net

To contact the editors responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net; Andrew Rummer at arummer@bloomberg.net


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