Greece's lenders still need to be persuaded that Athens can plug a bigger than expected fiscal gap when talks on reforms needed under an international bailout resume next week, the finance minister said on Monday.
Talks between the heads of the EU/IMF mission reviewing Greece's progress and the government over a tough pension reform plan, fiscal targets and the handling of bad loans, took a break on Friday after four days of meetings.
They are due to continue “sometime next week” and then conclude two weeks later, Finance Minister Euclid Tsakalotos said, adding that technical teams were discussing the size of the fiscal gap for 2016 and the country's performance last year.
Greece's stock market plunged about 8 percent on Monday on concern that the bailout review had hit a snag.
The country's industrialist federation warned that delays in the completion of the review could hurt the economy.
Without a positive assessment of Greece's bailout reforms talks on debt relief, desperately sought by Athens cannot take place.
“There are disagreements, which we will discuss when we return. What is important … is that they agree on the architecture of what we are proposing,” Tsakalotos told lawmakers.
“We must convince them … how we will reach the 3.5 percent of GDP primary budget surplus year by year,” Finance Minister Euclid Tsakalotos told lawmakers. “The pension and tax reforms will contribute to this in 2018.”
Before the review, sources close to the lenders said initial data indicated that Athens had to bridge a fiscal gap of well over 1.5 percent of GDP in 2016, up from 1 percent projected earlier, noting that these estimates would be later updated.
Greece's bailout target is for a 0.5 percent surplus in 2016 meaning that Athens needs to save more to achieve that target.
The EU and the IMF had yet to agree on how much was required to bridge the fiscal gap, another source said.
“They are pushing us, they question that the (pension reform) measures proposed will raise the amounts estimated and they want more,” a government official told Reuters declining to comment on fiscal gap estimates.
Relying on a fragile three-seat majority, Greek Prime Minister Alexis Tsipras wants to swiftly complete the bailout review to start talks on debt relief and convince the austerity-hit public that their sacrifices are paying off.
In an attempt to generate 1.8 billion euros in savings from its ailing pension system, Greece plans to increase social insurance contributions to buffer the elderly from pension cuts.
But the sweeping cuts have triggered outrage among groups including lawyers and farmers, who have blocked motorways with their tractors for the past two weeks and were planning to shift their protests to central Athens on Feb. 12.