No Greek deal reached in talks

Wed, Nov 21, 2012, 00:00

International lenders failed for the second week to reach a deal to release emergency aid for Greece and will try again next Monday, but Germany signalled that major divisions remain.

Euro zone finance ministers, the International Monetary Fund and the European Central Bank were unable to agree in 12 hours of overnight talks in Brussels on how to make the country's debt sustainable. They want a solution before paying the next urgently
needed loan tranche to keep Greece afloat.

Several European officials played down the delay, saying the disagreements were technical and a deal would be reached when they meet again on November 26th.

But German finance minister Wolfgang Schäuble told lawmakers at a closed-door briefing in Berlin that the lenders were split over several key issues including how to define debt sustainability and fill a hole in Greek finances.

"He sees the extension of the debt sustainability goal as one of the main bones of contention. The other is how to cover the Greek financing gap of 14 billion euros through 2014," said one source who attended the meeting of Chancellor Angela Merkel's centre-right Christian Democrats in parliament.

Dr Merkel herself told the lawmakers the gap could be plugged by lowering interest rates on loans to Greece and increasing guarantees provided to the euro zone's temporary EFSF bailout fund, in which Germany would take its share, a participant said.

She suggested a deal could be struck as early as next week but rejected the notion that big, bold actions could solve the debt crisis overnight.

"I believe there are chances, one doesn't know for sure, but there are chances to get a solution on Monday," Dr Merkel told the Bundestag lower house of parliament during a debate.

Greece is seeking to unlock a €31.5 billion installment of loans from an international bailout programme.

If ministers do reach a deal, Greece is likely to get a larger amount of about €44 billion because two additional installments are due by the end of the year under the programme.

The current programme, worth €130 billion has been frozen since June, when creditors determined that Greece was failing to meet the conditions of the bailout.

During the closed-door discussions that began yesterday evening, ministers and international officials also were at loggerheads over whether to give Greece two more years, to 2016, to reach a primary budget surplus, a concession requiring nearly €33 billion on top of existing bailouts.

Christine Lagarde, managing director of the International Monetary Fund, insisted that financing Greece to 2016 would help it to the path of making its debt manageable by the end of the decade.

But a number of member states resisted that suggestion, insisting on limiting questions of how to finance Greece through 2014. Using a target date of 2014 would cost less, but that would leave questions unresolved about the country's financing.

New York Times

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