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Greece, creditors to discuss options for debt restructuring

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Greece and its creditors are expected to discuss ways to restructure the country's debt ahead of a meeting of euro zone finance ministers on May 22, a European official told CNBC on Tuesday.

Athens agreed on Tuesday to introduce new laws on labor, energy reforms, pension cuts, and tax rises. This paves the way for a fresh disbursement of money from creditors in mid-June, but above all it allows Greece, its European creditors, and the International Monetary Fund to consider how they will restructure the country's debt.

A European official who follows the bailout talks, but asked to remain anonymous due to the sensitivity of the issue, told CNBC that there isn't a specific date for a solution to Greece's debt but the first discussions on this issue will start soon.

"From now until the Eurogroup meeting of May 22 there will be discussions to consider options for debt relief," the official said.

Greece has to legislate the new reforms within two weeks. However, these new laws won't take effect until 2019 and 2020 and will be dependent on the country's economic performance. For example, among the new measures is the promise to cut pensions in 2019 and cut the tax-free threshold in 2020 to produce savings worth 2 percent of gross domestic product. But if Athens exceeds its targets, it is allowed to offset the austerity measures and reduce taxes.

During the first stages of talks on debt restructuring, the European Stability Mechanism, which is the euro zone's permanent bailout fund, will produce a new debt sustainability analysis. Current economic forecasts indicate that Greece's public debt stood at about 180 percent of GDP in 2016.

The International Monetary Fund will also be doing its debt sustainability analysis to include the recently-agreed measures. The Fund wants an agreement on measures to make Greece's debt more sustainable before deciding whether it is participating with its own money in the Greek bailout program.

Dimitris Tzanakopoulos, spokesperson to the Greek government told reporters last month, that the IMF will make a "small" funding contribution that will not last for more than one year, so it ends at the same time as the current European program, which runs out in August of 2018.

The IMF's participation in the third bailout program to Greece is key for many euro countries, which perceive the fund's involvement as giving credibility to the reform process in Greece. One of these countries is Germany, but the upcoming federal election might reduce Berlin's room to restructure Greece's debt.

"We will get some IMF participation, but no significant number," Johannes Mayr, head of economic research at Bayern LB ,told CNBC via email.

On the debt issue, "we need a compromise between the IMF and the EU/ESM (European Stability Mechanism), he said, "and this is realistic only after the German elections."

Neil Dwane, global strategist at Allianz Global Investors, added: "National governments, like Germany, would lose popularity if they wrote off Greek debt."

"I would expect more extend and pretend from the EU and the IMF," he said via email.

The recently-agreed reform package for 2019 and 2020 took half a year to negotiate.

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