Eurogroup summit on Greek debt goes to the wire

The outlook for Greece receiving crucial rescue funding, and a solution for the sustainability of its huge debt mountain, remained unclear late on Monday after nearly 10 hours of talks between eurozone finance ministers in Brussels though officials indicated that an agreement was expected to be reached ultimately.

At around 10 p.m., sources told Kathimerini that talks were expected to continue for at least another two hours but that a solution would likely be thrashed out “one way or another.”

It appeared that the International Monetary Fund, which together with the European Commission and the European Central Bank has committed to two bailouts worth 240 billion euros for Greece, was pushing for “immediate front-loaded measures” to reduce Greece’s debt by 20 percent of gross domestic product by 2020.

According to sources, that reduction could be carried out immediately if the ECB were to forgo its profits on its Greek bond portfolio, by rolling over maturities and by launching a bond buyback scheme. But according to IMF calculations, there would be a need for reductions to interest rates on loans for both loan programs to levels below the cost of borrowing of the European Financial Stability Facility (EFSF) and other creditor states, which would amount to an indirect haircut. EU officials have objected to this proposal so it remained unclear what kind of compromise could be reached.

German Finance Minister Wolfgang Schaeuble told reporters such a haircut would not be legal if it was linked to new loan guarantees. “You cannot guarantee something if you’re cutting debt at the same time,” he said.

But other European officials stressed the importance of breaking the deadlock. Economic and Monetary Affairs Commissioner Olli Rehn said it was vital to release the next tranche of funding to Athens “to end the uncertainty that is still hanging over Greece” and urged all sides to “go the last centimeter because we are so close to an agreement.”

IMF chief Cristine Lagarde was more reserved, noting that any solution must be “credible for Greece.”

Earlier in the day, rumors had swirled that Prime Minister Antonis Samaras contacted Eurogroup chief Jean-Claude Juncker ahead of the Eurogroup summit to inform him that the coalition in Athens might collapse if there is no final decision on the country’s next loan tranche and its debt sustainability.

In a statement, government spokesman Simos Kedikoglou said the claim had appeared on Greek websites and was then reproduced by foreign media. “There are a lot of ‘well-wishers’ that put words that have never been uttered into the mouth of the prime minister and finance minister,” he said. “At this crucial time, everyone has to take care of what they say and write,” he added.

Earlier in the day Finance Minister Yannis Stournaras had expressed cautious optimism a deal would be reached. He said he believed “a mutually beneficial solution will be found today,” noting that Greece had fulfilled its obligations to foreign creditors and that it was now their turn to do so.

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