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Greece, EU/IMF lenders ‘reach deal on labour reforms, pension cuts’

Greece has reached an agreement with its lenders on key labour reforms, spending cuts and energy issues, moving closer to clinching a deal before a meeting of euro zone finance ministers on April 7, sources close to the talks said on Wednesday.

Negotiations between Athens, the European Union and the International Monetary Fund — which has yet to decide if it will participate in Greece’s current bailout — have dragged on for months, rekindling fears of a new crisis in Europe.

The main focus of the talks have been pension cuts, energy and labour reforms. Athens agreed last month to adopt measures worth 2 per cent of GDP to help convince the IMF to participate in the bailout, as demanded by EU countries including Germany.

Greece will cut pensions by up to 1 percent of GDP in 2019, two officials told Reuters on condition of anonymity. Lowering the tax-free threshold to save roughly another 1 percent of GDP has also been agreed, an EU official said.

“I believe there will be a staff level agreement by the April 7 Eurogroup,” one of officials said.

On labour reforms, Greece will not be forced to liberalise mass layoffs further, as initially demanded by the IMF, the official said. Collective bargaining, which was weakened as part of bailout reforms in 2012, is expected to be revived after the country’s current bailout programme expires in 2018.

Slashing the market share of state-controlled Public Power Corp through the sale of lignite units, has also been agreed, another official said.

The latest progress is expected to allow the return of EU and IMF mission chiefs to Athens in the coming days, to finalise details with Greek finance and labour ministers, ahead of the Eurogroup meeting in Malta. Talks are now held through teleconferences.

Greece is likely to start legislating for the reforms once the deal is sealed and as early as next week.

Finance Minister Euclid Tsakalotos has said that a deal on the second review of bailout progress will pave the way for crucial talks on debt relief in the medium-term, which will help the country return to debt markets before its bailout expires.

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