The FINANCIAL — Eurozone finance ministers meet in Brussels Monday for the third time in two weeks for talks on unlocking the next slice of aid to debt-crippled Greece, which is in danger of running out of money.
Greece has been waiting since June for a loan instalment of 31.2 billion euros ($40 billion), part of a 130-billion-euro financial assistance package initially granted early this year.
By the end of the year, Athens is also due to receive two more aid payments, worth 5.0 and 8.3 billion euros, in exchange for which it has pledged to implement a series of unpopular austerity measures.
“For once, it would seem, Greece can take none of the blame,” said Carsten Brzeski, an analyst at ING bank.
The Greek government, led by Prime Minister Antonis Samaras pushed through a fresh wave of deeply unpopular cuts through parliament earlier this month.
The Eurogroup statement issued after failed talks last Wednesday acknowledged that Greece had done everything that had been asked of it.
Samaras made much the same point in a statement issued hours after Wednesday’s failed talks ended, in which his mounting frustration was clear.
“Greece did what it had to do, and what it had pledged to do,” he wrote in a statement last Wednesday.
“Whatever technical difficulties in finding a technical solution do not justify any negligence or delay.”
Eurogroup ministers exchanged ideas over the weekend in an effort to clear the way to an agreement Monday.
On Sunday, French Finance Minister Pierre Moscovici insisted that the eurozone was very close to agreement on the issue, echoing remarks he made just after last week’s meeting broke up.
“I think that in effect we are very close to a solution,” he told BFM Television. “I don’t know if there will be an agreement tomorrow, I know it is possible and I want one.”
Failing this time around would be “irresponsible” he added, “given the efforts everyone has made”.
He provided few details about how a deal could be reached, but said it could involve a combination of decreases in interest earned by lenders and profits made by central banks on Greek debt.
As well as the eurozone finance ministers, also in attendance will be International Monetary Fund chief Christine Lagarde and Mario Draghi, president of the European Central Bank.
The IMF and the ECB, with the European Union, make up the troika of creditors that have insisted on it adopting the controversial austerity plan.
As EUbusiness reported, they have decided to give Greece an extra two years, until 2016 in other words, to balance its books. But that means Greece’s international creditors would have to find another 32.6 billion euros to cover the cost of granting this two-year respite.
The meeting also needs to agree on the timetable regarding bringing down the country’s massive debt levels. Lagarde wants Greece to get its debt down to 120 percent of GDP by 2020. Head of the Eurogroup Jean-Claude Juncker would rather put that deadline back to 2022.
The simplest solution would be for the creditors to agree to write off some of the Greek debt, and indeed a “haircut” was raised as a possiblity in German press reports Sunday.
The banks swallowed this bitter pill at the beginning of the year, and the IMF has urged the ECB to accept this solution, but both the central bank and Germany have so far held out against it.
German Chancellor Angela Merkel knows such a move would be unlikely to go down well with the voters.
“I’m against this debt write-off and I want to find another solution,” she said Friday.
But she nevertheless remained upbeat. “I have high hopes that we can resolve the question of the tranches of aid to Greece” at Monday’s meeting, she said, while acknowledging that there is still work to be done.
One source close to the talks said that progress had been made during Saturday’s round of telephone consultations.
Ministers agreed to cut interest rates on loans which Athens had already signed up to, though they have yet to agree on the revised rates, said the source.
They — and the ECB — have also agreed to lend Greece at least some of the gains they have made on the Greek bonds they hold.
And they agreed in principle on a buyout of Greek debt using the eurozone bailout fund, said the source.
It remains to be seen however, if the IMF will go along with this: the problem is that these measures would not bring Greek debt back to 120 percent of GDP by 2020, as Lagarde wants.
But according to one Greek ministerial source, the IMF might finally agree to move on this point, settling for a figure equal to 124 percent of GDP.