Greece Hurries to Hammer Out Policies to Satisfy Creditors

The Wall Street Journal

Athens aims to submit overhaul measures by no later than Monday

By NEKTARIA STAMOULI in Athens and  VIKTORIA DENDRINOU in Brussels

March 26, 2015 4:49 p.m. ET

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Greece is hurrying to compile a list of economic overhauls that satisfies its creditors and secures desperately need bailout aid, as it runs increasingly low on cash and debt payments loom.

Key officials in Greece’s new government, led by the leftist Syriza party, were hunkered down in meetings Thursday to flesh out new economic policies with the aim of submitting a list of overhauls by Monday at the latest, senior officials said. Greece hopes that eurozone finance ministers can meet and approve the country’s overhaul program as early as next Wednesday.

However, officials from Greece’s European creditor countries said the economic plans would first need a positive response from technocrats representing European institutions and the International Monetary Fund.

Greece has accelerated its efforts on the overhaul plans in recent days after German Chancellor Angela Merkel worked hard to convince Greek Prime Minister Alexis Tsipras in Berlin on Monday that there is only one way for Athens to secure the financing it needs: substantive economic overhauls.

Greece’s dwindling coffers have the government, and much of official Europe, wondering how much longer the country can pay both its maturing debts in April—including to the IMF—and the pension and public-sector wages of Greeks.

Greek officials are eager to focus on issues that are politically palatable for Syriza: tackling tax evasion and corruption as well as income-tax increases for the well-off and new rules for paying off tax debts in installments. Athens officials said the list also could include some privatization plans.

The challenge for Mr. Tsipras, however, is how to satisfy the demands from creditors—especially the IMF, backed by Germany—for overhauls in Greece’s pension system, labor laws, regulation of markets for goods and services, public-sector payroll, and sales-tax system. The IMF’s market-oriented remedies are ideological anathema to Syriza. But creditors say Greece has either to accept the IMF’s proposals or come up with alternatives that serve the goals of the bailout program just as well: to put Greece’s economy and finances on a stable footing that allows it to regain access to bond markets.

German officials say Mr. Tsipras can avoid deep pension cuts, for instance, if he moves sufficiently on other measures to boost tax revenues; and that he can increase social spending for the poor, a Syriza campaign pledge in the January election, if he cuts other budget items, such as defense.

Perceptions differ on how much work the Syriza-led government has to do to obtain money from the eurozone and IMF. Greek officials expressed confidence that a deal is near. “I believe that at the beginning of next week we will have an agreement on the package of reforms the Greek government is proposing, and on the funding of the country,” Economy Minister George Stathakis told local TV-station Antenna.

But European Union officials caution that the process could take longer, and that eurozone finance ministers might confer only the week after next, depending on how long it takes to negotiate policies. “I would expect some back and forth” between Athens and its creditors, an EU official said.

Once the EU-IMF teams and eurozone finance ministers approve the list of overhauls, Greece will have to pass at least a portion of them into law to get fresh funding.

The cash-strapped country has to pay some €1.7 billion ($1.9 billion) in pensions and public-sector wages at the end of this month. Then it has to repay a roughly €450 million loan from the IMF on April 9 and, in mid-April, about €2.4 billion in short-term debt held by private investors.

The government is scraping together cash by borrowing whatever it can from public-sector bodies. Since late February the government has taken over or borrowed at least €1.2 billion in cash from entities ranging from the central bank to the body that oversees EU agricultural subsidies and the country’s job-center organization.

Data from the central bank on Thursday showed that bank deposits fell to €152 billion in February, the lowest level since June 2005, as Greeks pulled some €8 billion of cash out of their accounts. Greek banks’ increasingly constrained liquidity is another source of pressure on the government to meet its creditors’ overhaul demands.

Write to Nektaria Stamouli at nektaria.stamouli@wsj.com and Viktoria Dendrinou at viktoria.dendrinou@wsj.com