UPDATE 1-EU ties next Greek visit to election, reform will

Wed May 30, 2012 1:25pm BST

(Adds quotes, details)

* EU says Greece must stick to bailout plan to get aid

* Date of next visit depends on outcome of June 17 election

* New budget cuts will be key test

By Harry Papachristou

ATHENS, May 30 (Reuters) - The European Union turned up pressure on Greece on Wednesday, warning it must step up reforms to keep getting full bailout aid and that the date of its next inspection visit to Athens will depend on the outcome of a general election on June 17.

Greece is anxiously awaiting the visit by the "troika" of EU, International Monetary Fund and European Central Bank officials, which will decide on unlocking more bailout funds.

The date of their inspection has been provisionally set for late June or early July, but the EU executive raised the prospect of it being delayed further if the election failed to produce a suitable coalition government.

"The date of the next review mission ... depends on the political outcome of the repeated elections," the European Commission said in a report on Wednesday.

"The mission is provisionally scheduled to take place in late June/ early July 2012, but the date may be revised in the course of the following weeks."

The European Commission made it clear in the report that the continuation of an international aid programme was contingent upon Athens pushing ahead with difficult reforms and on the formation of a government ready to honour the country's debt-reduction pledges.

"Implementation risks will remain very high," the report said. "Comprehensive international financial assistance can continue to be provided only if policy implementation improves."

REFORMS

The repeat election was called earlier this month after a May poll resulted in political deadlock between parties that support and oppose the 130-billion-euro rescue package Greece obtained in exchange for enacting tough austerity measures.

Concerns that the anti-bailout leftist SYRIZA party could win the election - it is currently running a close second in the polls behind the pro-bailout conservative New Democracy party - have sent shockwaves throughout Europe, raising fears that Greece may be obliged to leave the euro.

Without new bailout funds, Greece will run out of money by the end of June. The EU's EFSF rescue fund must still decide on the release of about 4 billion euros left over from an aid tranche agreed in March.

The Commission seemed to brush aside in the report calls by Greek pro-bailout leaders to relax the country's fiscal targets under the programme.

"The success of the programme ... hinges on the full and timely implementation of fiscal consolidation and growth-enhancing structural reforms," it said, adding that Greece must comply with a bailout condition to identify and implement about 11.7 billion euros in savings for 2013 and 2014.

"The determination of the Greek authorities to stick to the agreed policies will be tested in the coming months, when deficit-reducing measures to close the large (fiscal) gap for 2013-2014 need to be identified," the report said.

The leaders of Greece's two major pro-bailout parties, the conservative New Democracy and the Socialist PASOK, both said this weekend that the spending cuts should be spread out over four or five years to soften their impact on the economy.

The bailout deal allows for a possible relaxation of the bailout targets if the recession worsens. Greece has been going through its fifth consecutive year of recession. GDP slumped by 6.2 percent in the first quarter, versus a troika estimate for a 4.7 percent contraction for the full year.

Greece's deficit is planned to shrink to 7.3 percent of GDP this year from 9.3 percent in 2011. (Editing by Catherine Evans)

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