Euro nations split on how to help Greece cut debt
Country faces a bond repayment Friday
Eurozone finance ministers have ended a meeting in Brussels on Monday without agreeing on the next batch of bailout aid for Greece.
Jean-Claude Juncker, the head of the eurogroup, said the finance ministers hoped to reach a final agreement at an extraordinary meeting to be held Nov. 20, which he said would be a continuation of Monday's meeting. However, finance ministers did agree that Greece could have two additional years — until 2022 — to meet its debt reduction target.
Juncker praised the reforms and budget cuts made by Greek authorities, as did Christine Lagarde, the head of the International Monetary Fund, and Olli Rehn, the EU's monetary affairs commissioner.
The officials said Greece has only a few more actions it needs to take before getting the next €31.5 billion installment of its bailout loan. They did not specify the actions.
In addition, Rehn said Greece would not run out of money Friday, as had been feared, because it would be possible for the country to roll over the debt it owes.
A draft report on Greece's progress from the so-called troika of creditors — the European Central Bank, the European Commission and the International Monetary Fund —recommended giving Athens until 2016 to implement the reforms necessary to restart growth.
Before Monday's meeting of the 17 eurozone finance ministers in Brussels, Irish Finance Minister Michael Noonan said the extension would mean €31 billion to €32 billion in extra financing. While the two-year extension was agreed, apparently the means of financing it were not.
The troika has already pledged €240 billion in bailout loans to keep Greece afloat while it implements economic reforms and austerity measures to get its finances in order. The country has received around €150 billion of those loans so far.
The main aim of the bailout program is to get Greece back to a point where it no longer relies on international aid and can raise money on the debt markets. But the Greek government has been asking its creditors for more time to reach that goal— hoping that a slower pace would release the stranglehold the cuts have on the economy.
The country is heading into the sixth year of a deep recession, with more than a quarter of Greeks unemployed. Without growth, Greece has no possibility of collecting enough in taxes to put a dent in its debts. In fact, current projections suggest the country has no hope of reaching an original goal of bringing its debts down to 120 percent of gross domestic product by 2020 — a level generally considered sustainable.
"The two-year extension of the adjustment period will mitigate the impact on the economy, while securing a sustainable fiscal position," the draft document, obtained by The Associated Press, stated.
However, a debt sustainability report was not ready for the finance ministers' consideration. And before the meeting, Germany's finance minister, Wolfgang Schaeuble, said Greece could not receive the next installment of its bailout loan until the question of its sustainability was resolved.
"We first have to see if Greece has delivered," he said, as he headed into the meeting Monday. "I have not seen this."
Draft short on details
The issue of Greece's debt is a divisive and important one. If Greece's debts can't be reduced to a level where the country can reliably pay them down, then the billions of euros in bailout loans already agreed for Greece will have been wasted. But easing up on the timeline will cost more money, and politicians in other countries are nervous they won't be able to sell that to voters. Some countries are also irritated that Greece has consistently missed the deadlines set for it.
The draft troika report is short on details, but a eurozone diplomat said that, if the timeline for Greece's program is extended, the country will need an extra €15 billion through 2014 and another €17.6 billion between 2014 and 2016. Those figures are similar to the total Finance Minister Noonan gave.
Many economists are also suggesting that Greece will never reduce its debts to a manageable level unless its eurozone creditors agree to take losses on some of their loans. Private creditors have already wiped out more than €100 billion of Greek debt.