BRUSSELS, Belgium – Greece has “delivered” on reform and a deal will likely be clinched to unblock funds to keep it from bankruptcy, the head of the Eurogroup insisted despite a split with the IMF over how to get the stricken country’s economic recovery on track.
“Greece has delivered. (There are thus) good chances of an agreement,” said Jean-Claude Juncker, who presides the group of finance ministers from the 17 countries that use the single currency.
Juncker made his remarks on arriving for Eurogroup talks to discuss unblocking 31.2 billion euros ($40 billion) in aid to Greece, part of a 130-billion-euro financial assistance package initially granted early this year.
The 17 ministers are seeking to reach a framework deal on the long-overdue aid and heal a row with the International Monetary Fund (IMF) over Greece’s debt reduction target.
Greece, where the economy has shrunk by one-fifth since the crisis broke and which now faces a sixth year in recession, has been waiting since June for an instalment of aid from its second European Union-IMF rescue.
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.
IMF head Christine Lagarde, who has clashed openly with Juncker over the Greek rescue plan, said that Tuesday’s meeting in Brussels was crucial to getting Greece back on its feet and its debt mountain cut to sustainable levels.
“We’re going to work very constructively to see if we can find a solution to Greece,” the IMF chief, who cut short a trip to Asia to attend the Brussels meeting, told reorters as she arrived.
Olli Rehn, the EU’s economic affairs chief, said he too hoped for “results” on Tuesday.
“It is essential that we will be able to clear the air of all uncertainty… that is still hanging over Greece and thus over the eurozone,” he said.
Greece’s debt burden is nearly 180% of gross domestic product (GDP) and expected to rise to 190% by 2014. That is about three times the EU’s 60% limit and way beyond what the country can support, meaning it must be reduced one way or another.
Juncker wants the target of 120% of Greek debt-to-GDP ratio by 2020 pushed back to 2022. Lagarde opposes extending the deadline.
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 European Central Bank (ECB) rule out.
But the IMF cannot extend more aid to countries if their debt level is classed as unsustainable.
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% of GDP by 2014, but last week a delay to 2016 was agreed. – Agence France-Presse
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