Greece Reaches New Deal With Lenders

April 15, 2013

The New York Times

By NIKI KITSANTONIS

 ATHENS — After nearly two weeks of tense negotiations, Greece and its troika of foreign creditors said Monday that they had clinched an agreement on economic measures it must enforce to secure the release of further crucial rescue money, including thousands of layoffs in the civil service.

 “We wrapped it up; we have a deal with the troika,” Finance Minister Yannis Stournaras told reporters.

 Greece has been offered two bailouts worth €240 billion, or $310 billion, over the past three years, through a memorandum of understanding with the troika, consisting of the European Commission, the European Central Bank and the International Monetary Fund.

 In a televised address, Prime Minister Antonis Samaras said the deal showed that years of austerity in Greece were beginning to pay off.

 “The situation is changing,” he said. “Until recently, Greece had been the example to avoid. In two years, Greece will no longer depend on the memorandum, it will be a country with growth.”

 The troika issued a joint statement saying Greece was on track to curb its huge debt burden, which stood at 160 percent of gross domestic product at the end of last year.

 “Fiscal performance is on track to meet the program targets, and the government is committed to fully implement all agreed fiscal measures for 2013-2014 that are not yet in place,” the statement said, adding that the release of a loan installment of €2.8 billion that had been due in March “could be agreed soon by the euro area member states.”

 The International Monetary Fund’s envoy to Athens, Poul Thomsen, said at a conference organized by The Economist that the €2.8 billion, as well as another €7.2 billion for the recapitalization of Greek banks, could be released as early as next week

 The troika’s statement said an agreement had been reached on streamlining the Greek civil service and emphasized the importance of recapitalizing Greek banks without delay. It said Greece would probably return to growth next year.

 Mr. Stournaras was even more upbeat, saying Greece aimed to achieve a primary surplus this year, which would allow it to seek more debt relief, according to an agreement with creditors.

 The issue that caused negotiations to stall in mid-March was the overhaul of the bloated civil service, a contentious topic that has tested the cohesion of Greece’s fragile coalition government. The two sides finally agreed over the weekend that 15,000 civil servants would be dismissed by the end of next year, including 4,000 this year, according to reports in the Greek news media. The departures are to include employees close to retirement and an estimated 2,000 who have been accused of disciplinary offenses.

 In his address, Mr. Samaras said the 15,000 layoffs in the state sector would be replaced by new recruits as part of “a qualitative upgrade of the civil service.”

 “The same number of new young people will be recruited in their place,” he said.

 Earlier, Mr. Thomsen of the International Monetary Fund had said there would be new hires in the civil service, without specifying how many or in which areas, though the troika is believed to be eager to see the bolstering of tax collection services.

 The plan for the civil service overhaul prompted vehement reactions from the government’s political rivals, with Alexis Tsipras, the head of the main leftist opposition party, Syriza, describing it as “a human sacrifice” that would merely swell the ranks of the unemployed, who already account for 27 percent of the population.

 Others have said they suspect that the pledge of new hiring is a way to start laying people off without vehement protests.

 According to leaked details of the deal with the troika, foreign inspectors accepted Greek demands to reduce by 15 percent a contentious property tax, which was introduced as an emergency measure in 2011 but has been extended. The two sides are also said to have agreed on allowing Greeks owing taxes and social security debts to the state to pay them off in up to 48 monthly installments.

 Mr. Thomsen said that widespread tax evasion “remains a huge problem.” He added, however, that Greece had “indeed come a long way.”