Euro zone finance ministers poured cold water on Monday on a quick agreement that would unlock further aid payments to Greece. But Athens and its creditors did agree to pick up discussions in the coming days and Greek bonds rallied.

Creditors are demanding that Greece institute tax, pension and labour reforms before they will sign off on an agreement. Officials had once pinpointed Monday’s meeting in Brussels as the final chance to get Greece its money before Europe’s politicians get too distracted by upcoming national elections.

“There is still a lot of work that needs to be done,” Dutch finance minister Jeroen Dijsselbloem, who chairs the Eurogroup, told reporters. With Athens having about €6 billion in bonds coming due in July, there was no need for a disbursement before the end of May, he said.

After months of disagreements, European creditors have fallen into line with International Monetary Fund demands over the structural reforms.

Greek finance minister Euclid Tsakalotos met representatives of creditor institutions ahead of the meeting and sufficient progress was made for the bailout auditors to continue negotiations. They will go back to Athens “in the very short term”, Mr Dijsselbloem said.

Yield falls

The yield on Greece’s two-year bonds fell 58 basis points to 9.09 per cent on Monday, the lowest level since February 13th.

The delay to Greece’s latest aid payout and the debt relief that’s linked to it – seven years since Greece won its first bailout – stems from a refusal by European creditors to keep funding the country without the participation of the IMF. For its part, the Greek government had refused to comply with the extra austerity demanded by the IMF as a condition of its involvement.

The Greek government has now agreed to pre-emptively legislate measures which are fiscally neutral. Athens won’t institute any additional austerity, a Greek official told reporters in Brussels. The reforms will be effective from 2019, the official added, asking not to be named, in line with policy.

We welcome the Greek “progress to meet the requirements of the institutions in key areas; on that basis, we have agreed to send back the mission,” the IMF said in an e-mailed statement.

“More progress will be needed to bridge differences on other important issues, and it is too early to speculate about the prospect for reaching staff-level agreement during this mission.”

Once bailout auditors return to Athens, funds won’t be disbursed before the government completes a list of prior actions attached to the latest review of its economic support program. They need to reach a staff-level agreement that would pave the way for euro area sign-off.

“The most important thing is that Greece is out of the spiral of austerity that’s weighed it down since 2010,” French finance minister Michel Sapin said after the meeting. “The mood today was very positive and optimistic about the situation.”

– Bloomberg