Greece's lenders to launch new review as Athens digs in on debt relief

Greece and its creditors start a fresh round of talks this week on reforming its labor market, a tricky task for a leftist government sliding in opinion polls but needed if the recession-hit state can ever win debt relief.

Prime Minister Alexis Tsipras was re-elected a year ago promising to fight to revive collective bargaining and resist reforms that may lower the minimum wage. But he also needs a swift conclusion of the review to achieve Athens's primary goal of restructuring a mountain of debt, the highest in the euro zone, and mollifying an increasingly jaded public worn by years of austerity and unemployment.

Some opinion polls show Tsipras trailing opposition conservatives by up to 10 points, so the pressure is on for him to deliver.

"We are optimistic the second review can be quickly wrapped up to move on with debt relief," a government official said.

Under a conservative-led government, Greece froze the mechanism of collective bargaining in 2012, cut minimum wages and liberalized rules covering mass layoffs.

Lenders, particularly the International Monetary Fund, want further liberalization of redundancy rules and to retain the current minimum wage system which is set by law and not collective bargaining as the practice in other EU member states.

It is an incendiary issue in a country where almost two in five are jobless, and many families make do with one earner at home, if at all.

"After so many years of recession where labor rights were scrapped, Greece doesn't have any margin for extremes. Greece cannot forgo common practice which exists for workers in other EU member states," the government official who asked not to be named told Reuters.

A good basis for talks, the official said, was a recent report by a committee of experts suggested minimum wages be endorsed by collective agreements.

That is a red flag for the IMF. It has yet to decide if it will partake in Greece's latest bailout program, concerned at Greece's debt levels exceeding 170 percent of output. It is however an unlikely ally in Greece's call for debt relief.

Tsipras has set the bar high.

"I want to be clear. This vague urging for us to 'do our homework and then we shall see' cannot be accepted," Tsipras said to a steady applause from an audience of up to 3,000 party faithful at a congress of his Syriza party on Thursday night.

Although there is growing consensus among European creditors and the IMF on the need for debt relief, its form and scope remains unclear.

Political dynamics in Europe, including the electoral calendar of key European creditors, make it unlikely that a quick decision on debt relief will be made, a report from Moody's said.

Greece says it wants the review concluded by the end of the year, eyeing its inclusion in the European Central Bank's quantitative easing (QE), an asset buying program it is now excluded from. QE is now running to the end of March 2017, though it could be extended.

"The second review will be concluded, and simultaneously the measures must be locked in on debt restructuring. And simultaneously we should enter QE," Tsipras told his party.

"None of this 'we shall see'. Simultaneously", he said.

(Editing by Jeremy Gaunt)