ATHENS, Greece (AP) — Greece's euro partners agreed Tuesday to hand over a delayed billion euro ($1.4 billion) payment to the bailed-out country, just as its central bank warned over the economic impact of escalating political tensions.
Jeroen Dijsselbloem, the Dutch Finance Minister who heads the Eurogroup, said Greece had met the major conditions necessary for the latest loan instalment from its bailout package worth 240 billion euros ($330 billion).
The agreement came at a meeting of eurozone finance officials in Brussels and came despite a recent failure by the Greek government to agree a way ahead with the country's debt inspectors, made up of representatives from the European Commission, European Central Bank and International Monetary Fund.
However, Dijsselbloem said in a statement that he was confident that Greece will "swiftly conclude" discussions with the so-called troika "in order to allow for a completion of the ongoing review of the country's economic adjustment program."
Most economic forecasters, including Greece's conservative-led coalition government, think the country will return to growth next year following a savage recession that's wiped out more than a fifth of the Greek economy. The Bank of Greece backed the growth prediction in a report Tuesday, forecasting an expansion of 0.5 percent in 2014.
However, it said a "polarized atmosphere" among political parties could set back years of painful reforms and derail plans to emerge from a severe six-year recession in 2014.
It said the infighting could limit the benefits generated from years of austerity that have seen an improvement in Greece's public finances — the country is soon expected to be running a so-called budget surplus, before debt interest payments are taken into account.
"A serious problem is emerging with the polarized atmosphere of confrontation in politics, at a time when the opposite is required," the report said.
"There is concern that this atmosphere may worsen ... heightening uncertainty and weakening the factors that are currently underpinning the positive outlook for 2014."
Greece's traditionally dominant parties have been battered by years of drastic cuts and are currently joined in coalition in the third pro-bailout government in two years.
The left-wing opposition Syriza party took the lead in opinion polls this week, as parties ready for twin elections in May for local government and the European Parliament.
Syriza's leader Alexis Tsipras has vowed to try and topple the conservative-led coalition with a strong election showing, arguing that austerity measures have failed and that the population of nearly 11 million cannot suffer any more financial hardship.
Unemployment is currently above 27 percent, while prices fell by 2.9 percent in the year to November, raising fears of a damaging deflationary spiral whereby consumers put off purchases in the expectation of lower prices ahead.
"The Greek people are enduring an unfair and barbaric austerity program that will not lead the country out of crisis," the 39-year-old Tsipras said Tuesday while commenting on his nomination by left-wing parties in Europe as a candidate for European Commission president.
Also Tuesday, Greece raised 1.3 billion euros ($1.8 billion) in an auction of 13-week treasury bills, with the yield unchanged from a month ago at 3.90 percent.
The government is currently scrambling to meet key bailout requirements before the end of the year: To close around a dozen publicly run companies considered redundant, and receive parliamentary approval for a new property tax code and new regulations to protect distressed mortgage holders.
Parliament is scheduled to close Friday for the Christmas break.