BERLIN/ATHENS: International lenders failed for the second week to reach a deal to release emergency aid for Greece and will try again next Monday, but Germany signalled that significant divisions remain.
Euro zone finance ministers, the International Monetary Fund and the European Central Bank were unable to agree in 12 hours of overnight talks in Brussels on how to make the country’s debt sustainable. They want a solution before paying the next loan tranche which is urgently needed to keep Greece afloat.
Several European officials played down the delay, saying the disagreements were technical and a deal would be reached when they meet again on Nov. 26.
German Finance Minister Wolfgang Schaeuble said he was confident the funding gap could be filled by a mixture of letting Greece buy back its own debt at a discount, tapping ECB profits on Greek bond purchases, and lowering interest rates on government loans to Athens, but not below the cost to lenders.
“Additional measures are needed and we have spoken about this intensively with the International Monetary Fund. We agree essentially that the gap can and will be filled, that a buyback programme of Greek debt on the market will be carried out,” he told reporters.
Schaeuble earlier told conservative lawmakers at a closed-door briefing that the lenders were split over how to define debt sustainability and fill a hole in Greek finances.
“He sees the extension of the debt sustainability goal as one of the main bones of contention. The other is how to cover the Greek financing gap of 14 billion euros through 2014,” said one lawmaker who attended the meeting of Chancellor Angela Merkel’s centre-right Christian Democrats in parliament.
European governments want to give Greece an extra two years, until 2022, to cut its debt to a sustainable level of 120 percent of GDP but the IMF does not agree.
The Europeans, led by Germany, are refusing to write off any loans. Both options would make it easier for Greece to meet the targets in the bailout programme.
Merkel told the lawmakers the gap could be plugged by lowering interest rates on loans to Greece, extending their maturity to 30 years from 15, and increasing guarantees provided to the euro zone’s temporary EFSF bailout fund, in which Germany would take its share, a participant said.
“I believe there are chances, one doesn’t know for sure, but there are chances to get a solution on Monday,” she told the Bundestag lower house of parliament during a debate.
Greece needs the next 31 billion euro aid tranche to keep servicing its debt and avoid bankruptcy. Its next major repayment is in mid-December.
Athens says it has carried out the tough reforms required in the bailout programme but needs more time to reach fiscal targets agreed with lenders because its economy keeps shrinking.
French Finance Minister Pierre Moscovici said agreement was close, echoing overnight comments from Eurogroup chairman Jean-Claude Juncker, who said talks were stuck on technicalities.
“We are a whisker away from a deal. I am very confident we will get there on Monday,” Moscovici told Europe 1 radio.
Reuters
