Greece strikes deal with creditors for more funds

After nearly two weeks of tense negotiations, Greece and its troika of foreign creditors said they had clinched an agreement on economic measures it must enforce to secure the release of further crucial rescue money, including thousands of public service lay-offs.

"We wrapped it up; we have a deal with the troika," Greek Finance Minister Yannis Stournaras said. Greece has been offered two bailouts worth €240 billion ($301 billion) over the past three years, through a memorandum of understanding with the troika, which comprises the European Commission, the European Central Bank and the International Monetary Fund.

Greek Prime Minister Antonis Samaras said the deal showed years of austerity in Greece were beginning to pay off.

"The situation is changing," he said. "Until recently, Greece had been the example to avoid. In two years, Greece will no longer depend on the memorandum, it will be a country with growth."

The troika issued a statement saying Greece was on track to curb its huge debt burden, which stood at 160 per cent of gross domestic product at the end of last year.

"Fiscal performance is on track to meet the program targets, and the government is committed to fully implement all agreed fiscal measures for 2013-14 that are not yet in place," the statement said, adding that the release of a loan instalment of €2.8 billion that had been due last month "could be agreed soon by the euro area member states".

IMF envoy to Athens Poul Thomsen said the €2.8 billion, and another €7.2 billion for the recapitalisation of Greek banks, could be released next week.

The troika's statement said an agreement had been reached on streamlining the Greek public service and emphasised the importance of recapitalising banks without delay. It said Greece would probably return to growth next year.

Mr Stournaras was even more upbeat, saying Greece aimed to achieve a primary surplus this year, which would allow it to seek more debt relief.

The issue that caused negotiations to stall last month was the overhaul of the bloated public service, a topic that has tested the cohesion of Greece's fragile coalition government. The two sides finally agreed at the weekend that 15,000 public servants would be dismissed by the end of next year, including 4000 this year, Greek media reported. The departures are to include employees close to retirement and an estimated 2000 who have been accused of disciplinary offences.

Mr Samaras said the 15,000 lay-offs would be replaced by new recruits as part of "a qualitative upgrade of the public service".

"The same number of new young people will be recruited in their place," he said.

The plan for the public service overhaul prompted vehement reactions from the government's rivals, with Alexis Tsipras, the head of the main opposition party, Syriza, describing it as "a human sacrifice" that would swell the ranks of the unemployed, who already account for 27 per cent of the population.