Greece signals progress as deadlocked bailout talks restart

By Lefteris Papadimas
A Greek national flag flutters in the wind at the Plaka district in Athens November 7, 2014. REUTERS/Alkis Konstantinidis

By Lefteris Papadimas

ATHENS (Reuters) - Greece resumed talks with its EU/IMF lenders in Paris on Tuesday, saying progress had been made towards breaking a deadlock that could derail the government's plan to quit an international bailout by year-end.

The two sides have been at loggerheads for weeks over what is expected to be Greece's last inspection under the 240 billion euro (190 billion pound) rescue programme, raising doubts that a deal can be reached by a Dec. 8 deadline.

The surprise meeting in Paris comes after European Union and International Monetary Fund inspectors failed to return to Athens earlier in the month as expected.

"It signals progress," said a senior Greek government official on condition of anonymity. "It's an important step forward breaking the deadlock."

Finance Minister Gikas Hardouvelis told reporters in Paris that the two sides were "making progress" and that the target of the talks was to conclude the review.

The talks in Paris are expected to end on Wednesday or Thursday and officials have suggested the inspectors will return to Athens to seal a final deal if there is progress.

The talks will focus on the main point of contention between the two sides -- Greece's projected budget shortfall next year -- and reforms rolled over to next year and tied to a post-bailout precautionary credit line, an EU official told Reuters.

The lenders say Athens will miss its target for a near-balanced budget next year unless it waters down a generous state arrears payback plan for austerity-hit Greeks.

But Greece's government has ignored the objections and submitted its budget to parliament last week without approval from the inspectors.

Greece's government has staked its survival on abandoning the bailout, which has come at the price of deep austerity. It is hoping an early exit from the reviled programme will help it win enough support to scrape through a presidential vote in February and avoid the prospect of early elections.

(Additional reporting by Renee Maltezou, Writing by Deepa Babington; Editing by Catherine Evans)