Greece, EU/IMF lenders make progress but still no deal

ATHENS (Reuters) - Greece and its international lenders 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 and tax hikes, privatizations and the management of bad loans resumed this week in Athens with the aim to reach an agreement on the package ahead of a meeting of euro zone finance ministers in Amsterdam on Friday.

But most issues remained open despite the progress, a day before the Eurogroup which was meant to assess progress.

"There was significant convergence, more than in the past days," a Greek government official said. "We made more convergence on pension reforms and bad loans, the level of the income tax exemption remains an open issue."

The main sticking point in the talks, which have dragged on for months, concerns fiscal issues, as euro zone lenders and the International Monetary Fund continue to differ on whether reforms are enough to produce the required primary surplus. The IMF considers EU figures too optimistic.

The left-led government, which has a thin parliamentary majority, wants to wrap up the review to lure back investors and unlock 5 billion euros in bailout funds that Athens needs to pay ECB and IMF maturing debt and state arrears.

Negotiations will probably resume after the Eurogroup this week. If there is adequate progress, an initial deal could be finalised by an extraordinary Eurogroup meeting next week.

"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 after the meetings at a central Athens hotel.

On Thursday, Eurostat data also showed that Greece had a primary budget surplus before debt service last year, beating the target set in its bailout program.

Athens hopes this will help conclude the review and cement its position that it can achieve its 2018 fiscal targets and that it does not need to take additional measures now as suggested by the IMF.

"This result exposes the credibility of the IMF's projections and of those who talk of the need for extra measures so that Greece achieves the goals of 2018," a government official said, commenting on the data.

Due to the different growth and fiscal performance assumptions, international lenders also remained divided over whether Greece needs debt relief.

(additional reporting by Jan Strupzcewski)