The eurozone and International Monetary are struggling with Greece's debt crisis – not with Athens this time, but with each other over when to give Greece a break on its future massive debt repayments.
The eurozone has begun talks on debt relief for Greece but wants to postpone the final decision until 2018; the IMF insists Greek debt repayment is unsustainable and investors need clarity now.
Eurozone finance ministers are likely to forge a tentative plan when they meet next Tuesday – what in Brussels-speak is known as a political agreement. But their offer is unlikely to be anything but highly conditional, euro zone officials preparing the talks said.
The gist is to find a way to lower Greece's debt-repayment burden without actually cutting the debt itself via a so-called haircut. Instead, Greece's debt would be "re-profiled" – less interest, longer maturities, limits based on growth etc.
On May 9, the ministers asked their deputies to explore such specific measures which could be offered to Greece "if necessary" at the end of the bailout in 2018 if Greece implements all the agreed reforms.
The caveat "if necessary" has appeared in all euro zone statements on Greek debt relief since November 2012, mainly on the insistence of countries led by Germany, which do not believe it is needed at all.
The IMF has no such qualms. "To restore debt sustainability … decisive action by our European partners to grant further official debt relief will be essential," it has said.
The eurozone, however, has its competing members' views to deal with, which they will attempt to satisfy next week. Even with the "if necessary" phrase still in, officials say Greece and its euro zone lenders could both call it a victory.
"Greece can go home and say that the Eurogroup has decided 'in principle' to grant debt relief after 2018," one official said, while Berlin's hardline finance minister Wolfgang Schaeuble can tell Germans that what will matter is the state of Athens' finances only in 2018 and beyond.
But the problem with the eurozone's "if necessary" caveat is the IMF. Berlin badly wants the Washington-based institution – widely seen as a paragon of fiscal rigour – to take part in the Greek bailout to appease German hawks. But the Fund insists that debt relief is already necessary and has to be decided now, not in 2018.
"The IMF is unlikely to accept a vague promise of debt relief 'if necessary'," one official with insight into the IMF's views said. "The IMF's stance is that the mechanism and magnitude of debt relief needs to be agreed up front, before the IMF joins the programmers."
"The actual debt relief could be phased in over time. But by the end of any new (bailout) program, say in 2018, Greek debt would have to be judged sustainable, meaning that any relief granted thereafter would have to be locked in," the official said.
"Debt relief in the outer years, beyond 2018, could depend on GDP growth, for example, but could not be conditioned on policy measures, since that implies another future program and that debt is not sustainable with just this program," he said.
But eurozone ministers, even though their own bailout fund said it had serious concerns about the long-term sustainability of Greek debt, do not want to lock in anything now, fearing that once they do, they will lose any leverage over Athens.
"Many European countries are reluctant to structure debt relief in such a way that the Greek government has no incentive to continue strict implementation of the program," another official said.