EU unhappy with Greek reforms, debt relief in doubt

BRUSSELS — Greece's bailout creditors say the country has fallen behind on several key reforms that have been set as a condition for debt relief worth nearly 1 billion euros ($1.1 billion).

Valdis Dombrovskis, a European Commission vice president, said Wednesday that plans by the Greek government to provide protection for distressed mortgage holders are incomplete, despite weeks of negotiations between the government and leading banks aimed at coming up with a compromise.

Following a decade of financial crisis and international bailouts, nearly half of Greece's property and business loans are non-performing or in arrears by more than three months, and the government is under pressure to help banks improve their balance sheets. Current mortgage protection rules, which shield distressed property owners from foreclosure, formally expire Thursday.

"We fully share the objective of the Greek authorities to protect more vulnerable households," Dombrovskis said.

"However, currently, the legislative proposal has a large number of design and technical details which need to be settled so as to ensure that that scheme is generally temporary, properly targeted, can be operational in the near future, and improves the payment culture in Greece by not protecting strategic defaulters."

Eurozone finance ministers will on March 11 decide whether Athens has met the criteria for the next round of debt relief.

The measures under consideration include a freeze on low interest rates for bailout debt repayments as well as the payout of profits from Greek government bonds held by the European Central Bank.

Dombrovskis made the comments after the European Commission issued a 49-page report on the progress of Greek reforms. It also expressed concerns over delayed administrative reforms, and an increase in hiring in the public sector, as well as a recent minimum wage increase that it said "poses risks for employment growth and competitiveness."

EU Financial Affairs Commissioner Pierre Moscovici is due in Athens Thursday to discuss the results of the report.

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Gatopoulos reported from Athens, Greece. Follow at http://www.twitter.com/dgatopoulos

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