By Lefteris Papadimas and Renee Maltezou
ATHENS (Reuters) - Greece and its international lenders have made progress in negotiations on economic reforms, a Greek government official said on Thursday, but a final accord needed to unlock badly needed bailout loans remained elusive.
Talks on pension reforms, tax hikes, privatizations and the management of bad loans resumed this week in Athens with the aim of reaching an agreement on the package before euro zone finance ministers meet in Amsterdam on Friday to assess the progress.
"There was significant convergence, more than in the past days," a Greek government official said, adding that this concerned especially pension reforms and bad loans.
The main sticking point in the talks, which have dragged on for months, concerns fiscal issues, as EU institutions and the International Monetary Fund differ on whether it can meet a primary surplus target equal to 3.5 percent of gross domestic product in 2018. A primary surplus excludes interest payments.
The IMF considers EU assumptions too optimistic and sees Athens achieving a 1.5 percent primary surplus in 2018, unless it receives debt relief and takes additional austerity measures.
To reach a compromise, the lenders have suggested that Athens adopt measures proposed by EU institutions now and agree to implement additional reforms, worth up to 2 percent of GDP, if it misses its 2018 bailout targets.
But adopting contingent measures would be a tough task for the left-led government, which has a thin parliamentary majority and needs to conclude the review in order to unlock bailout funds to pay maturing debt owed to the IMF and the European Central Bank in July.
Negotiations will probably resume after Friday's Eurogroup.
"A good sign will be if tomorrow's Eurogroup makes an announcement that there will be a second extraordinary (Eurogroup) meeting," the government official said.
DIVIDED
Due to their different growth and fiscal performance assumptions, international lenders also remain divided over whether Greece needs debt relief.
The IMF wants a compromise on this issue before concluding the review, while euro zone countries, and in particular Germany, want to first end the review and then start talking about possible debt relief for Athens.
The European Commission said on Thursday that Greece had a primary budget surplus last year, beating the target set in its bailout program.
Greece believes the positive data can help conclude the review, signaling a better 2016 performance and cementing its position that it can achieve its 2018 fiscal targets without being forced to legislate contingent measures now.
"Greece ... does not need extra measures. What Greece needs, is an essential debt relief," Prime Minister Alexis Tsipras told Euronews.
But the Commission announcement on Thursday may change little. "It is irrelevant because it had been fully discounted beforehand," one senior euro zone official said.
Complicating things further, Greece's court of auditors - an advisory body - said the planned pension reforms, which unify rules for public and private sector retirees and merges pension funds, were unconstitutional and not quantified.
Greek Labour Minister George Katrougkalos said the decision was probably "a misunderstanding" and that actuarial studies would be submited to parliament along with the bill this week.