Euro zone to move on unfreezing Greek aid on Tue

The logo of the European Union and the word crisis are displayed on the screen an iPad and a LCD monitor in Zenica November 16, 2012.

BERLIN (Reuters) - Euro zone finance ministers will give a tentative go-ahead for the disbursement of 44 billion euros in emergency loans to Greece on Tuesday, but the money will only be paid on December 5 if the country meets all remaining conditions.

Officials familiar with preparations for the finance ministers' meeting expect a "political endorsement in principle" on unfreezing loans to Athens, along with a discussion on how to reduce Greek debt and provide two extra years of external financing to allow the country to meet its fiscal targets.

Greece must also show that it has fully committed to a detailed package of economic reforms, called "prior actions", before any further emergency loans can be paid out.

Once ministers have given their political endorsement, proposals on how to cut Greek debt and provide additional financing can be sent to national parliaments for approval, a step that is expected to be completed by November 30.

This will give Athens time to complete the few outstanding "prior actions". International lenders will check if the remaining reforms are in place on November 28 and euro zone finance ministers will make the final decision to pay the next tranche to Athens on December 3, according to the schedule seen by Reuters.

Greece and the European Commission would sign a revised memorandum of understanding on December 4 and Greece would get the money on Dec 5, according to a timeline of decisions on Greece agreed by the euro zone, seen by Reuters.

GREECE ON TRACK TO MEET ALL CONDITIONS

One of the key conditions for Germany for the resumption of lending to Greece, which was stopped after Athens fell far behind reforms and fiscal consolidation earlier this year, was that the loans would be paid to a special escrow account to make sure it would first be used to pay off Greek debt.

Greece appeared to meet that condition on Monday when Athens decided that privatisation revenues will be paid within 10 days into a special escrow account held at the central bank.

Asked about Greek declarations that the government has completed all the major steps required of them at this stage, a senior euro zone official said: "They have done so, and two small items remain to be done before disbursement."

The escrow account was set up under the country's second bailout deal with the European Union and International Monetary Fund last March.

In addition, Greece decided that public sector budgets would be monitored on a quarterly basis and if targets were missed, automatic spending cuts or tax hikes would kick in.

If fiscal targets are missed by more than 10 percent for two consecutive quarters and no corrective action is taken, the finance minister would appoint an administrator to oversee spending by the division missing the target.

From 2014 onwards, public sector entities would borrow for investment purposes only, subject to the finance minister's approval.

A second decree on further reforms has yet to be published, including a move to reduce the pay packages of parliamentary workers, bringing them into line with other public employees.