REUTERS - EU and IMF officials said on Friday Greece was broadly on track with plans to tidy up its finances and gave the green light for a new tranche of aid but warned it must speed up reforms to meet targets this year.
Here are key facts about Greece’s bailout plan, the first ever agreed to rescue a euro zone member in a crisis that has sent shockwaves throughout the bloc, spilling over to Ireland and threatening Portugal and Spain.
* Greece asked for help at the end of April last year to avoid default after being hammered on markets for months since the new Socialist government revealed public finances were in a much worse state than expected.
Its euro zone partners and the International Monetary Fund agreed in May to lend 110 billion euros ($149.8 billion) over three years in return for a tough austerity program.
* The deal requires Greece to slash public spending, get people to pay their taxes, open up a highly regulated economy and cut its budget deficit to under 3 percent of GDP in 2014.
* In return Greece gets quarterly aid loans, at a rate of about 5 percent. It has so far received a total of 38 billion euros in three instalments.
* Greece drastically slashed spending last year, meeting cash deficit targets and reducing the general government budget gap by about 6 percentage points.
It has however missed the target to cut the budget deficit to about 8 percent of GDP, partly because of a revision of 2009 budget data but also because of its failure to boost revenues as much as initially expected.
* It has agreed a number of far-reaching reforms including a shake-up of the pension system, increased taxes and opened up closed professions such as truck drivers and pharmacists, staying on the reform drive despite protests.
* But its lenders say it is too slow in improving tax collection, cutting red tape to set up businesses and streamlining the very large public administration, urging it to generally speed up reforms.
* Meanwhile, austerity measures are hitting the economy hard, with macroeconomic indicators showing a bleak picture.
The economy is seen contracting by 3 percent this year after a 4.2 drop last year, unemployment has climbed to a 13.9 percent record and will continue to grow, inflation has been over 5 percent for months, retail sales slumped 12 percent in November, construction is falling hard and credit growth is slowing.
* Greece’s fiscal progress has been praised by many analysts, but this has not prevented rating cuts or dismissed fears of a default. Spreads between 10-year Greek bonds and benchmark German bunds have narrowed since the height of the crisis but are still over 8 percent.
* Many analysts believe Greece will not be able to handle its debt mountain when the 3-year bailout ends and will need to restructure its debt at some point.
Debt will peak at over 159 percent of GDP in 2013, with the country’s borrowing needs ballooning to nearly 80 billion euros in 2014 and 87 billion in 2015, according to IMF forecasts.
* The EU, the IMF and Greece all agree the debt-choked country will need more help to overcome the borrowing hump.
* The EU and the IMF have agreed in principle to reschedule bailout repayments to help Greece overcome the 2014/2015 borrowing hump but no decision has been taken yet. The IMF says it can extend payments to up to 10 years but needs the EU to decide first what it wants to do.
Euro zone finance ministers have in principle agreed to the move but this will be part of a wider package on the euro zone crisis that leaders want to agree in March. ECB’s Axel Weber has suggested extending maturities to 30 years.
* Other options being considered for the March EU summits include the EU’s bailout fund EFSF lending Greece cash to buy back its debt at current market prices, which are at a discount to the bonds’ face value, or the EFSF itself buying back bonds and exchanging them for newer bonds.
Greece also strongly supports the idea of issuing joint euro bonds, which are unlikely to be agreed on any time soon as Germany has rejected the idea.
* The bailout plan gives Greece targets up to 2014 -- when it must bring its deficit under the EU ceiling of 3 percent of GDP -- but the country will still be highly indebted and it is widely believed it will still need some form of belt-tightening.
The government has decided to target a drastic budget deficit cut to about three billion euros in 2015 from nearly 17 billion this year, an official said this week.
Reporting by Ingrid Melander; Editing by Mike Peacock