Greece Reaches Deal to Release Foreign Rescue Funds

By NIKI KITSANTONISMARCH 18, 2014

The New York Times

ATHENS — After seven months of faltering negotiations, Prime Minister Antonis Samaras said on Tuesday that Greece had reached a deal with its foreign lenders on economic reforms necessary to unlock billions of euros in crucial rescue funding. He also pledged to distribute 500 million euros to one million Greeks hit hardest by the country’s economic crisis.

“The long negotiations with the troika have been completed successfully,” Mr. Samaras said in a televised news conference. “United, the government achieved its mission.”

He said his administration would honor a pledge to give a portion of a projected primary surplus — a budget surplus after debt payments — to “recompense the massive sacrifices of the Greek people.” Members of the police and security forces on low salaries would be among the beneficiaries of the immediate delivery of the €500 million, or $695 million.

Mr. Samaras added that €20 million would go toward covering the needs of the rising number of Greece’s homeless and that the state would repay €2.8 billion in debts to suppliers in the private sector this year, €1 billion more than the amount budgeted. An additional €1 billion would go toward reducing Greece’s debt burden.

There was no immediate statement by Greece’s so-called troika of international creditors: the European Commission, the European Central Bank and the International Monetary Fund. But Simon O’Connor, a commission spokesman, said at a Brussels news briefing that policies had been agreed to and that a “technical level agreement” would be completed during the day.

The troika’s audit started last September but dragged on because of disagreements over the extent of austerity measures Greece must impose to meet the terms of its international bailout and secure €10 billion in pending rescue loans that Greece needs to pay down bonds that are due to expire in May.

The troika has extended Greece two bailouts worth €240 billion since 2010.

Greece and the troika agreed to reduce the social security contributions paid by employers and workers by 3.9 percentage points, a measure aimed at helping struggling businesses and lifting wages, the prime minister said.

A series of structural, growth-oriented reforms aimed at increasing competitiveness will also be enforced, Mr. Samaras said, although he did not provide details of those changes. Greece has agreed to various austerity measures like cuts to public sector salaries and pensions as well as tax increases, including a fivefold rise in property taxes.

Finance Minister Yannis Stournaras, who has coordinated the talks between the troika and Greek government officials, said the review was the toughest hurdle Greece had cleared since it signed its first loan deal in 2010.

“It has been a very, very difficult seven months — the hardest review yet,” he said at the joint briefing with Mr. Samaras.

A crucial point of contention was the size of a projected primary surplus and what should be done with it. Greece puts the surplus at €2.9 billion for this year, but Eurostat, the European Union’s statistical agency, is scheduled to issue an official estimate in April.

The Greek government, which is bracing for European Parliament and local elections in May, wanted to give the surplus to austerity-weary citizens. Mr. Samaras hinted last year at such benefits, which foreign auditors are believed to have opposed.

But local news reports also indicated that the auditors were concerned about the possible political impact on the fragile Greek coalition if those promises were revoked two months before local elections, leading to possible gains for anti-bailout parties.