Greece Reaches Deal With Creditors on Next Portion of Financial Aid

Reforms to include overhauls to banking sector, design of a privatization fund, partial privatization of power grid operator

By NEKTARIA STAMOULI

Dec. 11, 2015 3:44 p.m. ET

The Wall Street Journal

ATHENS—Greece and its international creditors reached a deal on Friday on a new set of economic overhauls the government must implement to receive the next slice of €1 billion ($1.1 billion) in financial aid.

“We have reached a deal on this round,” Greek Economy Minister George Stathakis told reporters after the latest round of negotiations.

The list of reforms includes overhauls to the country’s banking sector, the design of a privatization fund and the partial privatization of the country’s power grid operator, ADMIE.

Still, Greece must first legislate the agreed overhauls at a parliamentary vote, which is expected to take place on Tuesday. Then senior officials from eurozone finance ministries can give the go-ahead for the disbursement of the aid tranche by the end of next week.

According to the agreement that has been reached, ADMIE will be split off the country’s power utility Public Power Corp., which fully owns it. The state will retain the majority 51% stake, while 20% will be sold to a strategic private investor and the remaining 29% will be privatized.

Under the up-to-€86 billion in loans Greece struck in August with its international creditors—the European Union, the International Monetary Fund and the European Central Bank—the country has to set up a new privatization fund and use its assets to generate revenu e in the coming years to pay down its debt.

The fund will consist of the country’s current privatization fund, the country’s bank rescue fund, real-estate assets and state holdings in public utilities, according to Greece’s Finance Minister Euclid Tsakalotos.

Greece also agreed to legislate and implement new rules regulating the sale of business non-performing loans.

But the two sides decided to put off for a while the issue of bad loans held by small and medium enterprises, consumers and mortgages. Athens is struggling to avoid the sale of these categories to distress funds, which buy loan books of distressed debt at a discount and try to recover the money. An agreement on these types of debts will have to be reached by mid-February.

This means that the government’s toughest test lies in the months ahead, when—apart from the bad loans—it will be called to implement a far-reaching overhaul to its pension system and impose higher tax measures.

Write to Nektaria Stamouli at nektaria.stamouli@wsj.com