Eurozone, IMF far from Greek deal: source on talks

(PARIS) - Eurozone finance ministers and the IMF are still far from a deal on releasing rescue funds to Greece because of disagreement over Greece's debt pile, a source close to failed overnight talks told AFP on Wednesday, contradicting France.

"We are really not close to an agreement," the source who declined to be named said after eurozone ministers and the IMF failed in talks in Brussels which went into the early hours of Wednesday morning.

The talks were being held up by "hawks" in northern Europe, the source said.

The talks, lasting 11 hours, were unable to agree on releasing the latest installment of rescue funding needed to save Greece from bankruptcy and which are tied to approved new austerity measures, because of the related issue of managing the huge Greek debt mountain.

The source told AFP that the talks, attended by the director general of the International Monetary Fund, Christine Lagarde, and the president of the European Central Bank, Mario Draghi, were stuck on the issue of how to ensure that Greek debt is sustainable in the medium term.

But French Finance Minister Pierre Moscovici said that the meeting had ended just a "whisker" away from a deal.

However he also said that the eurozone "would be under threat if we were not to get there" but insisted that "we are very close to an agreement."

German Chancellor Angela Merkel said in Berlin on Wednesday that she saw "a chance" that agreement could be reached at a follow-up meeting of eurozone finance ministers on Monday.

The IMF was insisting that measures be agreed to ensure that the ratio of Greek debt to output be reduced to 120 percent by 2020 from an expected figure of 190 percent, the first source said.

Currently, the IMF "is refusing to sign an agreement which it considers to be unrealistic," the source said.

The eurozone finance ministers, meeting as the Eurogroup, are to meet meet again with the IMF and the ECB on Monday.

The IMF is constrained by its statutes from lending to a country which cannot reasonably be expected to repay its debt in the medium-term.

The ratio used as a benchmark of sustainability is 1.2 percent of annual output, or a debt of 120 percent of gross domestic product.

The source said that the overnight talks had investigated a "patchwork of measures" to deal with Greek debt.

One route was to reduce the interest rate on loans to Greece by the eurozone and to extend the repayment period.

Several more technical arrangements had also been discussed, the source said.

"But to achieve the intended outcome, several small measures must be put together, and each of these runs into objections of various types," the source said.

Objections arose mainly from so-called "hawks" in northern Europe, the source said, pointing to Germany, the Netherlands and Finland.

Another official who attended the talks said that the Eurogroup had "identified the two or three points on which it can go forward."

He said that governments might have further contacts alongside a European Union summit on Thursday and Friday being held to deal with another issue, the EU budget.

That might open the way for the finance ministers who were holding up progress "to obtain the flexibility needed to reach a compromise (on Greek debt," he said.

According to hypotheses provided to AFP, if an agreement is not reached on the Greek debt, the debt will total 144 percent of Greek gross domestic product in 2020, on the basis of the most optimistic outlook for enactment of structural reforms and privatisations.

The eurozone, the IMF and Greece had intended to reduce the debt ratio to 120 percent by that date, although several European countries now hold that this target could be relaxed.