International lenders pave way for Greece to receive latest payment of bailout loans

Agreement on reform reached despite debt inspectors warning of an 'uncertain economic outlook'

Greek state school teachers protest outside of the Ministry of Administrative Reform in Athens (EPA)

Greece's debt inspectors reached an agreement with the cash-strapped country on reforms needed for the release of the next batch of bailout loans despite warning of an “uncertain” economic outlook.

Though the country's international creditors noted that progress has been made in some sectors, they said more needs to be done if certain economic targets are to be met. They added that the Greek authorities have "committed to take corrective action" to ensure that they are.

The latest review of Greece's economy by the so-called troika — the European Commission, European Central Bank and International Monetary Fund — will feature heavily in key discussions later over Greece's bailout. The finance ministers of the 17 European countries that use the euro meet in Brussels later and are now expected to approve the release of another installment of the rescue funds that Greece has been relying on since May 2010. They will also assess the employment policies in the Greek public sector and overall reform.

Hammered by a financial crisis since late 2009 and in the sixth year of a deep recession, the troika said Greece's reform program remained "broadly in line" with projections. It also laid out the hope of a gradual return to growth next year.

However, it said "policy implementation is behind in some areas" and that the Greek authorities have said they will do more to ensure delivery of the fiscal targets for 2013-14, noting in particular efforts to restrict overspending in the health sector.

The government has also "committed to take steps to bring public administration reforms back on track," including pushing through plans to reduce the number of civil servants, one of the required measures that has been among the most contentious — and delayed — in Greece's reform program.

The government must put 12,500 civil servants on administrative leave by the end of 2013, with the possibility of dismissal. Those targeted include 2,200 school security personnel, 3,500 members of the Athens municipal police, which will be disbanded and most of its members absorbed into Greece's police force, at least 2,000 local government employees, 1,500 teachers and several employees of various ministries.

They will be paid 75 percent of their normal salary and if they aren't transferred to other state agencies within eight months of being put on leave, they will be subject to dismissal.

Municipal workers across the country went on strike Monday to protest the plan, while the country's civil servants union, ADEDY, called a four-hour work stoppage from noon for all civil servants in the capital, Athens, and a demonstration in the center of the city.

The municipal workers' strike was expected to see all local services, including trash collection, suspended, with the exception of welfare and social services.

After years of fiscal mismanagement and overspending, Greece has found itself locked out of the international borrowing markets and relies solely on funds from its bailout for the past three years. In return for the cash, the government has pledged to overhaul its economy.

But the reforms, which have included big cuts in salaries and pensions as well as repeated tax hikes, have left the economy mired in the sixth year of a deep recession, with unemployment spiraling to above 27 percent.

A public backlash has resulted in frequent violent protests and led to repeated political crises that have led to four different Greek governments in less than four years.

Critics say Greece's rescue plan was mismanaged, with the austerity hampering any chance of growth. The depth and scale of the recession is way more than expected and that's worsened the country's debt dynamics.

AP