The troika have agreed that Greece’s macroeconomic outlook “remains broadly in line with programme projections, with prospects for a gradual return to growth in 2014”, although uncertainty remains.
The conclusion will be broadly encouraging for the Greek government, which is hoping that European finance ministers will give the go-ahead for the next €8.1bn tranche of aid this afternoon.
In a memo released this morning in Brussels, the troika – made up of the European Commission, the European Central Bank and the International Monetary Fund – said that while progress is being made, some reform policies are running behind schedule.
The Greek government has committed to a number of reforms intended to achieve primary balance this year, including regaining control of overspending in the health sector, reforms of income tax, property tax and tax procedure codes, public sector staff cuts, and steps to crack down on tax avoidance. The mission also discussed further plans to strenthen financial stability and the social safety net.
On Friday, it was reported that European commissioner Olli Rehn confirmed what many officials have already said in private, that the next tranche of aid could be split into several instalments, depending on "whether Greece can meet all requirements that they are committed to".
Talks with the troika stumbled last week over a missed deadline to put 12,500 state workers into a "mobility scheme" resulting in a transfer or redundancy within a year, and Greece was given an extended deadline and agreed to put another 12,500 staff in the scheme by the end of the year. Analysts at Citi say the handling of this by officials inside and outside Greece will be critical.
The key stumbling block of reducing the public sector headcount remains the most difficult to overcome. The government risked collapse last month, as the smallest coalition party withdrew its support because of divergent views on this very issue. The risk of another political crisis in Greece may work as a strong disincentive for international lenders to put too much pressure on Greece to approve the next bailout tranche.