Greece reaches agreement with 'troika' on bailout tranche

Eurozone finance ministers approved a €4.8bn payment of aid to Athens on Monday after an agreement on further cuts to the public payroll in Greece removed one of the biggest challenges to the country's €172bn bailout.

Despite the official sign-off, there were warnings from some of the bloc's policy makers that Greece still faced an uphill struggle to keep its rescue programme on track.

"The path for Greece will remain a difficult one. I would warn against any illusions," said Wolfgang Schauble, Germany's finance minister. "It is far from the case that all problems are resolved."

Earlier, negotiators for the "troika" of lenders - the European Commission, European Central Bank and International Monetary Fund - said the staff-level deal included agreement on the most vexing issue, the reduction of public sector staffing.

Greek efforts to meet troika redundancy targets led Antonis Samaras, the country's prime minister, to shutter its national broadcaster last month, setting off a wave of protests that nearly brought down the government.

But the troika statement said the Greek government had now agreed to "completing staffing plans by year-end", including meeting the "agreed targets for mandatory exits". Greek officials said at the weekend that 25,000 people would be put in a "mobility scheme" by the end of the year, where they would either be found new jobs or be let go.

The eurogroup's approval of the aid payment to Greece on Monday marked a significant turnround for Mr Samaras, whose government saw a junior coalition member defect over the broadcaster shutdown, bringing its parliamentary majority to just four votes and putting his reform efforts at risk.

The crisis became acute when the IMF informed EU counterparts that without a deal on a tranche payment this month, it would have to suspend its participation in the programme; IMF rules prevent it from disbursing funds without 12 months of financing in place, and EU funding for the programme is estimated to run out in July 2014.

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Eurozone officials said they would split the tranche into at least two pieces - the bulk to be paid by early August - so they can maintain pressure on Greece to continue reforms.

The troika said some issues remained unresolved, including the Greek government's desire to cut value added tax on restaurants from 23 per cent to 13 per cent to boost the domestic tourism industry. But it said troika officials would continue to discuss the proposal on a staff-level basis.

"The government is preparing the necessary legislation in support of its programme and will table an omnibus bill shortly before parliament," the troika said. "The authorities are also preparing ministerial decisions and other legal steps to implement their commitments in the coming days."

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