Eurozone finance ministers hope to forge a compromise on Greek reforms on Monday in a final push to secure the support of the International Monetary Fund for Athens’s bailout program by the end of the year.
The 19 ministers of the currency bloc were holding their regular meeting a day after Italian voters rejected constitutional reform plans in a referendum, putting the euro under renewed pressure and reigniting the smoldering eurozone crisis, further complicating the Greek talks.
Athens is required by its eurozone creditors to pass wide-ranging reforms and sell state assets under an 86 billion euros ($92 billion) bailout program, but negotiators have not been able to agree on labor and energy reforms or Greece's 2018 fiscal targets, leaving ministers to close the remaining gaps.
A deal would allow discussions on substantial relief measures for Greece, whose debt, at about 180 percent of gross domestic product, is the highest in the eurozone.
A first set of short-term measures for the debt, to be applied before 2018, will be presented by the European Stability Mechanism, the eurozone bailout fund.
Ministers arriving at the Eurogroup meeting were confident that a deal on short-term measures could be reached on Monday, although officials said this would be far from enough to make Greece's debt sustainable.
Discussions on more significant debt measures could start already on Monday, but a compromise is seen as unlikely. The chair of the Eurogroup, Jeroen Dijsselbloem, said he did not expect a deal on a big debt relief for Greece on Monday.
A second meeting may be needed before Christmas, EU officials said. One official said further talks could also be postponed to January.
New Year deadline
The IMF, a key creditor in prior Greek bailouts, has linked its participation in the bailout to a deal on a significant cut in Greek debt and has set the end of the year as a deadline for a decision.
Germany, the eurozone's largest economy, wants the IMF on board to reduce its own exposure to Greece and help step up the pressure on Athens to make reforms.
Berlin insists that Athens should maintain a budget surplus – excluding debt servicing payments – for several years after the end of the bailout program in 2018.
"I think for Greece it is realistic that they should carry out reforms to make themselves competitive. It's about that, nothing more … For Greece it is a long, hard road.", Germany's Finance Minister Wolfgang Schaeuble told reporters.
The IMF considers Germany's demands unrealistic unless Greece gets significant debt relief or adopts new budget cuts. The Greek government opposes further austerity measures.
EU Commissioner for Economic Affairs Pierre Moscovici told reporters before the Eurogroup that fiscal requirements for Greece "need to be demanding but also credible.”
Although Athens is not in immediate need of new funds, it is keen to reach an overall deal in December so that it can be included in the European Central Bank's bond-buying program before this is overhauled in March.
It also fears that elections in Europe in 2017 may make debt relief less likely, if no decision is reached soon. Germany holds an election in the autumn and its voters tend to shun politicians who appear lenient towards Greece and other southern European countries.
Elections in March are also likely to unsettle the Dutch government and push out finance minister Dijsselbloem, who is a key negotiator in Greek talks and called last week on euro zone creditors to be "realistic" in the fiscal targets they set for Greece.