Friday October 24, 2014 Search
Weather | Athens
19o C
12o 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)  
Greek private workers´ union calls 24-hour strike for November 27
Finance Minister appeals for support for amendments ahead of vote
Credit line only open to Greece if it meets economic targets, sources say
Venizelos slams Turkey for ´flagrant violation of international law´ off Cyprus
Tax revenues up by 1 bln euros in 2nd quarter, public sector wages down
Tax revenues increased by nearly 1 billion euros in the second quarter of this year, according to data released on Friday by the Hellenic Statistical Authority (ELSTAT) on Friday while publi...
ECB bank assessment to show 6-billion-euro capital gap, Citi says
The euro area’s biggest banks will show a 6 billion-euro ($7.6 billion) capital gap in the European Central Bank’s tests of the quality of their assets and ability to withstand economic shoc...
Inside Business
SOCCER
Panathinaikos snatches point at Eindhoven
Panathinaikos offered its fans a glimpse of its glorious past in European competitions snatching a draw at PSV Eindhoven, on an otherwise bad night for Greek soccer in the Europa League, as ...
BASKETBALL
Greens succumb to first loss at Bayern
Panathinaikos’s unbeaten run in all competitions came an end on Thursday as the Greek champion lost 81-75 at Bayern Munich for the Euroleague. Bayern is a team that improves every year, and ...
Inside Sports
COMMENTARY
Tension for tension’s sake?
It is evident that Turkish President Recep Tayyip Erdogan feeds off tension. He would barely have achieved as much as he has – and prevailed – if he had not been so keen to confront a series...
EDITORIAL
Testing ground
The Regional Authority of Attica is a good testing ground for politicians who appear to thrive on accusations to prove whether they can actually solve major problems of a practical nature. T...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Tax revenues up by 1 bln euros in 2nd quarter, public sector wages down
2. ECB bank assessment to show 6-billion-euro capital gap, Citi says
3. EU says Turkey´s energy hunt off Cyprus is a a ´serious concern´
4. Greek private workers´ union calls 24-hour strike for November 27
5. Finance Minister appeals for support for amendments ahead of vote
6. Credit line only open to Greece if it meets economic targets, sources say
more news
Today
This Week
1. Woman killed in tram accident in Floisvo, south of Athens
2. Clocks to go back 1 hour on Sunday
3. ECB vies for third time lucky in European stress tests
4. Venizelos slams Turkey for 'flagrant violation of international law' off Cyprus
5. Cyprus GDP upgrade seen as boosting bailout exit plans
6. Cyprus president to be released from hospital on Friday following readmission
Today
This Week
1. The past, present and future of the Greek debt crisis
2. Greece’s closed society is central to its current malaise
3. Coalition shooting itself in the foot
4. Greece must stick to reforms, says Schaeuble
5. At least 11 banks to fail European stress tests, three in Greece, report says
6. Cyprus to block Turkey's EU talks after EEZ violation
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.