Brussels, 21/11/2012 (Agence Europe) - Eurozone finance ministers left Brussels in the early hours of Wednesday morning, 21 November, empty-handed after twelve hours of talks. The chair of the meeting, Jean-Claude Juncker, expressed some disappointment at the outcome because he had been optimistic upon arrival in Brussels on Tuesday afternoon that the meeting about to begin would end in agreement (see EUROPE 10734). This new delay, slammed by Athens on Wednesday, is due to problems among eurozone countries at agreeing among themselves and also about agreeing with the International Monetary Fund (IMF) about the sustainability of the Greek debt. Agreement is vital, however, for disbursement of the next batch of financial aid for Greece, which could total €44 billion. Eurogroup will now be meeting again, on Monday 26 November, although a final decision may not be forthcoming until the start of next month. Tough at this stage to assess how the lack of agreement on Greece will affect the talks on the EU's seven-year budget, the multi-annual financial framework for 2014-2020 (see related article).
French economy minister Pierre Moscovici said Eurogroup had made considerable progress in one week and the finishing touches were now needed, which would be applied on Monday. He refused to comment on areas of disagreement, talking simply of “technical parameters” to be decided upon in order to get Greece's debt back on track. He acknowledged later that the talks were about how to reduce the interest rates on the loans to Greece from international lenders, or how to reduce central banks' profits on their Greek bonds - two options for Europe.
Greece's debt looks set at the moment to reach 190% of GDP in 2014 and the disagreement between the IMF and the eurozone is about exactly when the debt-GDP ratio will be reduced to 120%. The IMF says the original deadline of 2020 should remain in place (the deadline set in the spring of this year when agreement in principle on the second Greek bailout was reached). The eurozone wants to push the deadline back to 2022. On this issue, IMF director general Christine Lagarde and Juncker said on Wednesday that they had moved closer. European sources say the IMF may give way on the deadline.
Any extension of the deadline will cost money because Greece will require further financing and there is disagreement about how to fill the gap. Europe is recommending a combination of approaches, such as a reduction in interest rates on loans already outstanding, an extension of repayment deadlines for the loans and maybe a repayment holiday. The idea of Greece getting aid from the eurozone bailout fund to buy back its own bonds has also been mooted. Addressing German government parliamentarians on Wednesday, the German chancellor, Angela Merkel, talked of cutting the interest rate on loans to Greece, explains Reuters. She also talked of increasing by €10 billion the national guarantees for the eurozone bailout funds to ensure Greece is able to buy back some of its bonds at a low price. This option has also been mentioned by German finance minister Wolfgang Schäuble. Reuters says Greece may suggest buying back €40 billion of bonds at a third of their face value.
The way the IMF sees it, however, none of these solutions deals with the root of the problem because they will not help Greece return to the money markets unaided any time soon. The IMF wants the eurozone to agree to a write-down in the value of the bonds held by institutions (central banks). Finland and Germany, which have general elections scheduled for September 2013, are not keen on this.
At the European Parliament, Rebecca Harms (Greens/EFA, Germany) ruled out any option that would be costly to European taxpayers. Graham Watson (ADLE, UK) says the eurozone should find some more money to help buy back Greek debt and the IMF should not be so stubborn.
Athens gets impatient. On Wednesday, Juncker admitted that Greece has filled its side of the deal and it was now time for the eurozone to follow suit. The eurozone says the Greek government has implemented all the priority action and special measures required by the financial aid programme.
The lack of any decision about disbursement of the next batch of aid sparked off a volley of reaction from the Greek coalition government. The prime minister, Antonis Samaras, who will be meeting the head of Eurogroup on Thursday, said that the problems were no justification for negligence and delays. He was echoed by his coalition partners, Evangelos Venizelos of PASOK and Fotis Kouvelis of DIMAR, who urged Greece's troika of lenders to immediately fulfil their commitments, warning of the dangers inherent in any further delays. (EL/transl.fl)