Eurogroup ministers fail to get Greek bail-out deal
Stournaras - Juncker - Photo EU Council
(BRUSSELS) - Eurozone finance ministers failed at an emergency meeting Wednesday to strike a deal to unblock bailout funds needed to keep Greece from bankruptcy and said they would try again next week.
The Eurogroup ministers said in a statement at the end of talks that ended in the small hours that no deal had been reached and they would meet again next Monday "for further technical work on some elements of the package".
The ministers went into the negotiations Tuesday expressing confidence that a deal would be reached to unblock 31.2 billion euros ($40 billion) in aid to Greece and resolve a rift with the IMF over how to get the debt-stricken state's economy back on track.
But the talks ended nearly 12 hours later with a statement saying only that they "made progress in identifying a consistent package of credible initiatives aimed at making a further substantial contribution to the sustainability of Greek government debt".
"It was progress but we have to do a little bit more," International Monetary Fund boss Christine Lagarde told reporters as she left the meeting.
The euro tumbled in Asia in the wake of the failure. The single currency fell to $1.2751 and 104.30 yen after hitting highs of $1.2820 and 105.07 yen before the announcement from Brussels.
A major bone of contention was whether to give Greece, which faces a sixth year in recession, an extra two years until 2022 to arrive at a point where it can raise its own funds.
Jean-Claude Juncker, who presides the Eurogroup of finance ministers from the 17 countries that use the single currency, had called for that option but Lagarde very publicly disagreed in the run-up to the negotiations in Brussels.
"I am a little bit disappointed," said Juncker after the talks, but he said that he believed "a deal will be possible on Monday" and repeated that he was "impressed" with the reforms Greece had carried out to meet its bail-out terms.
"Greece has delivered. Now it's up to us to deliver," said Juncker.
The talks in Brussels began on Tuesday as striking municipal workers demonstrated in Athens and occupied government buildings across Greece to protest against yet another round of austerity imposing more cuts in jobs and public spending.
The IMF, which along with the European Central Bank (ECB) and the EU form the troika overseeing the Greek bail-out, has argued that if Greek debt is to be sustainable in the long run, it must be reduced to 120 percent of GDP by 2020.
If that target cannot be achieved, the IMF might have to withdraw from efforts to stabilise the Greek economy as it cannot extend more aid to countries if their debt level is classed as unsustainable.
Greece's debt burden is currently nearly 180 percent of GDP and expected to rise to 190 percent by 2014. That is about three times the EU's 60-percent limit and way beyond what the country can support, meaning it must be reduced one way or another.
Juncker has said he wants the target of 120 percent pushed back to 2022.
The options being bandied about before the talks began included recycling ECB profits on Greek bonds, lowering the interest rate Greece has to pay, and extending deadlines for repayment.
Greece has been waiting since June for an instalment of 31.2 billion euros ($40 billion) in aid, part of a 130-billion-euro financial assistance package initially granted early this year.
By the end of the year, Athens is also due to receive two more aid payments, worth 5.0 and 8.3 billion euros, in exchange for which it has pledged to implement a series of unpopular austerity budget measures.
Under the current bailout, private sector creditors agreed to write off 100 billion euros of Greek debt, and it has been suggested that official creditors should now do the same -- an option the EU and the ECB have ruled out.
The ECB meanwhile cannot accept a write-down because doing so would mean in effect that it was giving a government direct financing, which its rules forbid.
Under its bailout terms, Greece was supposed to reduce its public deficit -- the shortfall between government revenue and spending -- to the EU limit of 3.0 percent of GDP by 2014, but last week a delay to 2016 was agreed.
German Finance Minister Wolfgang Schaeuble said after the failed Brussels talks that "we have a better mechanism to ensure that the commitments will be respected step by step in the future".