After almost 12 hours of talks, stretching into Wednesday morning, eurozone finance ministers were unable to agree with International Monetary Fund managing director Christine Lagarde on a formula to reduce Greek debt and agreed to meet again on Monday to try to resolve the issue.
In a statement issued on Wednesday morning, the Eurogroup acknowledged the steps taken by Greece to meet its program targets but said it would have to debate further what action to take next.
“The Eurogroup noted with satisfaction that all prior actions required ahead of this meeting
have been met in a satisfactory manner,” the ministers said in their statement. “This reflects a wide ranging set of reforms, as well as the budget for 2013 and an ambitious medium term fiscal strategy for 2013-16. These efforts demonstrate the authorities' strong commitment to the adjustment program.
“Against this background, the Eurogroup has had an extensive discussion and made progress in identifying a consistent package of credible initiatives aimed at making a further substantial contribution to the sustainability of Greek government debt. The Eurogroup interrupted its meeting to allow for further technical work on some elements of this package. The Eurogroup will reconvene on Monday, 26 November.”
The delay in reaching a conclusion means that Greece is to be kept waiting for news on the disbursal of up to 44 billion euros in bailout instalments, some of which it was hoping to receive at the beginning of next month as the government is running out of cash to cover its basic needs.
Despite reports of the eurozone failing to bridge its differences with the IMF over how to make Greek debt sustainable and rumors of splits among finance minister, Eurogroup chief Jean-Claude Juncker insisted there were no irreparable differences.
"We are close to an agreement but technical verifications have to be undertaken, financial calculations have to be made and it's really for technical reasons that at this hour of the day it was not possible to do it in a proper way and so we are interrupting the meeting and reconvening next Monday,» Juncker told reporters.
"There are no major political disagreements,» he said.
A document prepared for the meeting and seen by Reuters declared that Greece's debt cannot be cut to 120 percent of GDP by 2020, the level deemed sustainable by the IMF, unless euro zone member states write off a portion of their loans to Greece.
The 15-page document, circulated among ministers, set out in black-and-white how far off-track Greece is in reducing its debt to the IMF-imposed target, from a level of around 170 percent of GDP now.
The document set out various ways Greece's debt could be reduced between now and 2020, but concluded they would not be enough without euro zone creditors taking a hit on their own holdings -- something Germany and others have said would be illegal.
The document did say Greek debt could fall to 120 percent of GDP two years later -- in 2022 -- without having to impose any losses on euro zone member states or forcing through a buy-back of Greek debt from private-sector bondholders.
Without any corrective measures the document said Greek debt would be 144 percent in 2020 and 133 percent in 2022, figures first reported exclusively by Reuters last week.
"To bring the debt ratio down further, one needs to take recourse to measures that would entail capital losses or budgetary implications for euro area member states,» the document says.
"Capital losses do not appear to be politically feasible and would jeopardize, at least in a number of member states, the political and public support for providing financial assistance."
Among the main measures under consideration to bring Greece's debt burden down as rapidly as possible is a debt buy-back under which Greece would offer to purchase bonds from private investors at a discount to their nominal value.
Several options are under consideration, officials have said and the document makes clear, including using about 10 billion euros to buy back bonds at between 30 and 35 cents in the euro.
There are also proposals to reduce the interest rate on loans already extended by euro zone countries to Greece, to impose a moratorium on interest payments and lengthen the maturities on loans, all of which would cut the debt burden.
[Kathimerini English Edition & Reuters]