Thursday Jan 29, 2015 Search
Weather | Athens
14o C
9o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
EU, IMF clash over Greece revives debt crisis fears

A clash between Greece's international lenders over how the stricken country where the eurozone debt crisis began can bring its debts down to a sustainable level reignited fears on Tuesday that the crisis could flare up anew.

Eurozone finance ministers suggested that Athens should be given until 2022 to lower its debt/GDP ratio to 120 percent but International Monetary Fund chief Christine Lagarde insisted the existing target of 2020 should remain.

"We clearly have different views. What matters at the end of the day is the sustainability of Greek debt so that country can be back on its feet, Lagarde said late on Monday, in an unusually public airing of disagreement.

Behind her sharp exchange with Eurogroup chairman Jean-Claude Juncker lies a rift over whether eurozone governments need to write off some of Greece's debt to them to make it manageable. IMF officials have pressed for such a haircut while Germany, the biggest contributor to euro zone bailout funds, has vehemently rejected it as illegal.

German Finance Minister Wolfgang Schaeuble told reporters on Tuesday that the 2020 deadline was a little too ambitious."

"There's a debate about a haircut for official creditors. On that I will say and most countries have said so in the past few weeks that that's legally not possible, he added.

Chancellor Angela Merkel has signaled she wants to keep Greece in the eurozone but is determined to avoid losses for German taxpayers before a general election in September 2013.

With so much stake, diplomats remain confident that a deal will be done to release a 31.5 billion euros tranche of bailout money which Athens urgently requires to avert bankruptcy.

But it is a way off yet.

Financial markets, which have been calmed by the European Central Bank's pledge to buy eurozone government bonds to shore up the currency bloc, took a dim view of the failure to agree.

The euro dipped to a two-month low against the dollar and safe-haven German Bund futures rose to two-month highs.

"There seems to be quite a big difference of opinion between the IMF and eurozone finance ministers ... but our view is still that Greece won't leave the eurozone, Rabobank rate strategist Lyn Graham-Taylor said.

Juncker, who heads the 17-nation group of eurozone finance ministers, said a further Eurogroup meeting would take place on November 20 and officials said more negotiations could be required the week after that to nail down a new deal.

French Finance Minister Pierre Moscovici told reporters on Tuesday that bailout money should flow by the end of the month.

"Our objective is to reach an agreement in principle on November 20 so that we can ... proceed to the disbursement of funds by the end of this month, he said.

The delay leaves Athens scrambling to meet a 5 billion euro bond repayment deadline on Friday, but EU officials were confident that it would not default.

With Greece's overall debt pile set to hit 190 percent of GDP next year, the IMF has set 120 percent as the target, saying that anything much above that is not sustainable given Greece's low growth prospects and high external borrowing requirements.

"All avenues in order to reduce debt on Greece are being explored and will continue to be explored in the coming days, Lagarde said.

If the IMF, which is concerned about its own integrity, were to walk away from the Greek bailout, the eurozone would have to contribute extra funds and its reputation in financial markets could be severely damaged.

Equally, if the IMF were to back down, its authority would be diminished.

The eurozone ministers did agree on Monday to give Greece two more years to make the spending cuts demanded of it but by doing so they face an extra funding bill of around 33 billion euros, according to a document prepared for the meeting.

A target was set in March for Greece to achieve a primary surplus of 4.5 percent of GDP in 2014. That will now be moved to 2016 giving Athens some breathing space to temper a deep recession that is to all intents and purposes a depression.

Despite Greece approving a tough 2013 budget last week, which it hoped would meet conditions for the release of the next tranche of emergency loans under its second bailout program, Lagarde said more work was needed to cement the budget measures.

"There will be a few, only a few additional prior actions to be verified in the coming days, she said.

Loans have been held up since Athens, which has received two bailout packages from the eurozone and IMF, went off-track with promised reforms and budget cuts, partly as a result of holding two elections in the space of three months earlier this year.

Until the bailout money flows, Greece will issue more short-term paper to keep itself afloat. Athens will sell one- and three-month T-bills later on Tuesday to refinance the 5 billion euro issue maturing on November 16. Its debt agency expressed confidence the issue will be fully funded.

Three officials told Reuters that the troika had concluded that Greece's debt burden will fall only to 144 percent of gross domestic product in 2020 and roughly 10 percentage points lower two years later if current policies do not change.

To get the higher figure down to 120 percent of GDP requires lopping the best part of 50 billion euros of Greece's debt pile.

Among the new instruments under consideration to reduce Greek debt are the removal of the 150-basis-point interest above financing costs on 53 billion euros of bilateral government loans to Greece, and lengthening the maturity of the loans.

Greece may also borrow from the eurozone bailout fund to buy back its privately held debt, of which there is 50-60 billion euros, taking advantage of the deep discount it trades at to save money on redemptions and interest payments.

"It may be that we take some measures to reduce interest rates that will have an immediate effect on the budget, Schaeuble said. Apart from that we expect that the problems will be solved within the financial framework of the second program by allowing more time with additional measures. [Reuters]

ekathimerini.com , Tuesday November 13, 2012 (12:37)  
New Democracy looks to pick up the pieces
New Greek FM to address dispute with EU on Russian sanctions
Ministry handover fuels reform vows
Tsipras tries to strike balanced tone in first cabinet address
Reinstatement of minimum monthly salary at 751 euros
New Labor Minister Panos Skourletis announced on Wednesday the immediate restoration of the negotiation process for collective labor contracts and the Organization for Mediation and Arbitrat...
Full speed backward for Greeces energy policy
Greeces energy strategy, from privatizations to energy diplomacy, will be fully reversed as of today, new Production Reconstruction and Energy Minister Panayiotis Lafazanis announced on Wed...
Inside Business
SOCCER
PAOK strikes deal with Portugals Ricardo Costa
PAOK announced on Tuesday its agreement with Portuguese international defender Ricardo Costa. The Thessaloniki club added that the player is expected on Wednesday to undergo a medical test a...
BASKETBALL
Basket League favorites survive challenges on the road
PAOK consolidated its position in the top three of the Basket League with a triumph at AGO Rethymnou on Saturday, while Olympiakos and Panathinaikos emerged victorious from their tough away ...
Inside Sports
COMMENTARY
Greece puts mind over money
Whenever a public intellectual runs for or is appointed to high public office, people who think and/or write for a living tend to get very excited. At some point after that, they usually get...
COMMENTARY
EU must accept that Greek debt relief is inevitable
A prediction for you: Greece and the European Union will split the difference in their quarrel over debt relief. What's uncertain is how their respective governments will justify the new dea...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. Reinstatement of minimum monthly salary at 751 euros
2. Full speed backward for Greeces energy policy
3. Bank deposits have lost over 7 bln this month
4. Deal with Cosco to be reviewed after OLP tender is called off
5. Greek markets crash on govt pledges
6. New Democracy looks to pick up the pieces
more news
Today
This Week
1. Athens may veto further EU sanctions against Russia
2. Greek PM Tsipras pushes on with radical change, markets tumble [Update]
3. EU must accept that Greek debt relief is inevitable
4. Greece's looming clash in Europe starts with sanctions on Russia
5. EU toughens stance after Tsipras names cabinet
6. A turn toward responsibility
Today
This Week
1. Greek Elections 2015 | LIVE
2. SYRIZA heads for historic victory but without majority
3. Greek Elections 2015 | LIVE
4. Greeks fork out nearly 5 pct of their incomes on telecom services
5. Greek Elections 2015: The day after | LIVE
6. Poll shows SYRIZA leading ND by 4 pct
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2015, H KAΘHMEPINH All Rights Reserved.