Greece faces pensions cuts to head off debt default

GREECE is on course to avoid a debt default this summer after creditors reached a deal with Athens on reforms including pension cuts and tax changes lasting until the end of the decade.

Jeroen Dijsselbloem, who leads the group of eurozone finance ministers, said creditors had reached an agreement in principle on the “size, sequencing and timing” of Greek reforms.

The agreement also paves the way for the International Monetary Fund (IMF) to join the country’s third, €86bn (£73bn) bailout programme.

The Eurogroup chief said “significant progress” had been made in all areas, with debt inspectors expected to return to Greece shortly.

A final agreement among finance chiefs will unlock a €7bn tranche of rescue funds, enabling Athens to pay a series of creditors in July, including the European Central Bank.

“We’ve solved all the big issues,” said Mr Dijsselbloem. “The big blocks have now been sorted out and that should allow us to speed up and go for the final stretch.”

The measures, which include cuts to pensions and a widening of the tax base, amount to 2pc of Greek gross domestic product in 2019 and 2020.

Greece will be able to implement “parallel expansionary measures” if the economy is strong enough, said Mr Dijsselbloem.

He said discussions on mediumterm debt relief would not be discussed at a political level until a full agreement is reached and approved by the Greek government, which has a slim majority. Pension cuts are likely to spark a fresh wave of protests across the country.

Euclid Tsakalotos, the Greek finance minister, said austerity measures would be legislated “in the coming weeks”. “There are things that will upset the Greek people,” he said.