Greece advances in loan talks, under fire for euro exit plan

Athens, July 28

Greece pushed ahead with talks on a new rescue loan on Tuesday, but its government came under increasing pressure over claims it had a top-secret plan to prepare for a euro exit that involved accessing citizens' personal tax data.

Emissaries from Greece's international creditors held a second day of preparatory talks with Greek officials, ahead of higher-level negotiations later this week on the country's new multi-billion euro lifeline.

The talks in Athens aim to thrash out the terms of the deal worth about 85 billion euros (USD 94 billion) over three years before August 20, when Greece must make a debt payment that it cannot afford without new loans.

It will be the country's third bailout in more than five years. So far, Greece has received about 240 billion euros from the European Union and the International Monetary Fund.

In return, it was forced to implement painful spending cuts, tax increases, and wide-ranging market reforms. The austerity deepened a sharp recession, and caused unemployment to swell to a peacetime record.

This week's talks will include an array of issues such as pensions and labor market reforms, where the government is being asked to cut early retirement, raise retirement ages, streamline the pension system and ease restrictions protecting workers from mass layoffs.

Prime Minister Alexis Tsipras has reluctantly accepted the reforms in principle even though he has repeatedly said he doesn't agree with them abandoning the staunchly anti-austerity policies that brought his Syriza party to power six months ago. The U-turn was necessary after talks with bailout creditors came very close to collapse and Greece was threatened with exit from the euro currency union unless it agreed.

Parliament has already approved two batches of reforms, drastically increasing sales tax on key consumer goods, and reforming the banking and judiciary systems. But that caused a rift within Tsipras' party, and about a quarter of his lawmakers refused to back the reforms, which were passed with the help of pro-European opposition parties. Early elections now seem likely after the bailout deal is signed.

Adding to Tsipras' troubles, his former finance minister, Yanis Varoufakis, has claimed that he tried to surreptitiously clone his own ministry's tax records with the help of a childhood friend, as part of a contingency plan requested by Tsipras before the January elections. The idea, according to Varoufakis, was to set up a parallel banking system that would allow transactions to continue in euros, but with a provision for immediate conversion to a new currency were Greek banks to be closed down.

The alleged scheme never received Tsipras' go-ahead, and Greek banks did close down for three weeks with severe limitations on withdrawals that remain in force, although domestic transfers were still allowed.

The head of the finance ministry's IT services denied that the ministry systems had been tampered with, adding that adequate protection measures are in place. — AP