To make sure Greece reaches agreed fiscal targets, it was proposed by international lenders to prepare a package of additional savings measures which would be passed into law now, but implemented only if needed.

The way for the debt relief would be cleared and the disbursement of new loans to Athens enabled once Greece agrees to the set of contingent reforms, together with the measures already under negotiation.

A long dispute between the euro zone and the International Monetary Fund over whether Greece’s current reforms are enough seems to be coming to an end with the idea of a contingency package.

“We came to the conclusion that the policy package should include a contingent package of additional measures that would be implemented only if necessary to reach the primary surplus target for 2018,” the chairman of euro zone finance ministers Jeroen Dijsselbloem told a news conference in Amsterdam after the ministers met.

He said that the contingency measures need “to be credible, legislated up-front, automatic and based on objective factors”.

Dijsselbloem said that on top of the 3 percent of GDP savings that are to come from reforms under negotiation now, the contingency package is to produce savings of 2 percent of GDP.

The euro zone believes Athens can reach 3.5 percent primary surplus while the IMF says 1.5 percent primary surplus is more realistic for Greece and the amount is the difference between euro zone and IMF forecasts.

A scheme to deal with bad loans, the setting up of a privatization fund and a pension and income tax reform is included in the current set of reforms. The content of the contingency set is not decided yet.

Euro zone ministers would meet again on Thursday to approve the deal and have a “serious discussion” on debt relief for Greece after agreement on both reform packages — the regular and the contingent one.

But Athens’ backing for the new package remains unclear.

“There are political constraints,” a negotiator said.

While lenders did not refrain from reminding their Greek counterparts that there are time constraints, the prospect of debt talks may facilitate Greece’s backing.

“The liquidity situation is becoming tight, there are debt service payments … more are coming in the next few months, there is a risk that the government may have to accumulate domestic arrears again,” the head of the euro zone bailout fund Klaus Regling said.

Dijsselbloem said that in parallel with the discussions on the reforms, talks and analysis on how to design debt relief will now start.

Since the IMF does not believe Greece can maintain a surplus of 3.5 percent for decades, it is insisting on debt relief from euro zone governments. the IMF also believes that debt reprofiling is the only way to make it sustainable in the long run. Greek debt stood at 177 percent of GDP last year.

Germany and several other countries point to the fact that Greece does not need to service its debt for the next seven years and believe that with proper reforms Greece can keep such a surplus for decades.

(Adapted from Reuters)