Greece has met all of its targets under the austerity plan laid out for it by the European Union and International Monetary Fund, and should receive its next tranche of financial aid as scheduled, pending final reviews, the EU, IMF and European Central Bank said in a joint statement Thursday.

" Greece has made a good start on the program having acted vigorously and ahead of schedule in some aspects," said Servaas Deroose, Deputy Director General of Economic and Financial Affairs for the EU, at a press conference in Athens .

As reported, Greece is due to receive a second tranche of EUR9 billion in October, under the EUR110 billion aid package agreed in May. The IMF is due to provide EUR2.5 billion, with the member states of the euro zone providing the rest.

"The staff-level agreement reached with the Greek authorities will pave the way for the conclusion of the first review under the loan facility agreement and stand-by arrangement, subject to approval by the Commission, the Eurogroup, and the IMF's management and executive board," said the joint statement from the EU, IMF and ECB.

The three reviewing parties said that the Greek economy had developed largely in line with their expectations since May, and reaffirmed their forecast of a 4% contraction in gross domestic product there this year, followed by another 2.5% contraction next year. They revised up their forecast for inflation this year to 4.75% due to increases in indirect taxes but said it would "decline rapidly" in the absence of second-round effects.

They also sounded a relaxed note on the health of the banking system, saying the decline in its capital adequacy was only "moderate," and that the rise in bad loans was in line with expectations.

The ECB representative said at the press conference that the central bank was pleased the government had started a review of public-sector banks as well as the fact that it was conducting due diligence. "We welcome the move for the strategic review and we also want to continue to see the government guaranteeing local bank issued bonds that can be used as collateral with the ECB or the Eurosystem so they have ample liquidity," said Klaus Masuch, ECB Head of EU countries.

The delegation said that the basic strategy underpinning the support program was to give the Greek government time to build a good track record before returning to the markets.

"Markets understand the reforms are serious but it needs to be a sustained period of implementation. Spreads will then eventually come down. But we don't expect any return the markets very soon, said Poul Thomsen, the IMF's Greece Mission Chief, at the press conference.

The delegation said they expect Greek budget revenue to accelerate in the second half of the year as more of the government's indirect tax increases come into effect, enabling targets to be met by the end of the year.

"We did not discuss any new measures only the implementation of those already agreed," said Deroose.

The delegation underlined that while the government is ahead on some structural reforms like pension reforms, which it described as "impressive," there are still many more reforms that must be undertaken.

It said Greece must open up the so-called "closed off professions" and to liberalize the wholesale energy sector to improve economic growth, employment and incomes. "We discussed various issues for liberalization. There are various options on the table and the discussions are ongoing," said Thomsen.

Another key issue to address is the country's loss-making railway system which has a massive EUR10 billion debt and still offers poor services. The delegation said Greece needs to decide by itself how to proceed with a comprehensive restructuring program.

"The current program and support package reflects the government's priorities, we are only here on behalf of the international community to provide technical advice," Thomsen added.

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