INTERVIEW-EU's Rehn says close to deal on Greek aid

AIX-EN-PROVENCE, France, July 7 Sun Jul 7, 2013 7:31pm BST

AIX-EN-PROVENCE, France, July 7 (Reuters) - International lenders are very close to wrapping up talks with Greece to unlock further aid though more efforts are required from Athens, the EU's top economic official told Reuters a day before euro zone finance ministers meet to decide on the aid.

Athens has been in talks with inspectors from the European Union, European Central Bank and International Monetary Fund since Monday to settle issues in its bailout performance review after failing to deliver on public sector reforms.

"We are very close to a staff-level agreement," EU economic and monetary affairs Commissioner Olli Rehn said, referring to talks between officials.

"The final decision is for tomorrow. The ball is in the Greek court and it depends on whether Greece is able to deliver the remaining elements of the milestones that have been agreed."

Greece hopes that euro zone finance ministers will agree to up to 8.1 billion euros ($10.40 billion) in aid when they meet on Monday as it needs part of the money to redeem about 2.2 billion euros of bonds in August.

The government missed a June deadline to put 12,500 state workers into a "mobility scheme," under which they are transferred or laid off within a year, but agreement was reached after lengthy talks on Saturday, Greek officials have said. Other issues discussed included ways to cover a fiscal gap.

Rehn reiterated comments first said on Friday that Greece could get its next tranche of international aid in various installments.

After worries over the euro zone resurfaced over the past weeks with political turmoil in both Greece and Portugal, the EU Commissioner said it was crucial that Lisbon kept working on restoring stability.

Portugal's prime minister promoted the head of the junior coalition party to be his deputy on Saturday, hoping to end a political rift that sparked high level resignations and threatened to bring down the government and endanger the country's bailout.

"Portugal scored an own goal one or two weeks ago. However, political leaders are now taking action in order to ensure political stability of the country, which is essential in order to continue stabilization and restore recovery in the country," Rehn said, adding that this was key for the country to eventually exit its EU/IMF bailout.

Portugal had been held up as an example of a bailout country doing all the right things to get its economy back in shape.

Rehn welcomed the European Central Bank's decision on Thursday to respond to turbulence caused by the U.S. Federal Reserve's exit plan from money-printing by abandoning its own insistence that it never offers forward guidance on policy.

The ECB said it would keep interest rates at record lows for an extended period.

"For market participants and the general public it is most useful that the ECB has clarified its intentions with forward guidance," he said. "The United States and Europe are at different points of the economic cycle. While the U.S. has a more restrictive approach, Europe needs to continue with a more accommodative policy."

($1 = 0.7792 euros) (Reporting by Ingrid Melander; Editing by Elaine Hardcastle)