EU ministers fail to agree on Greece

SARAH DILORENZO AND JUERGEN BAETZ
Last updated 11:58 13/11/2012

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Eurozone finance ministers have ended their meeting in Brussels without reaching a final agreement on the next batch of bailout aid for Greece.

Jean-Claude Juncker, the head of the eurogroup, said the finance ministers hoped to reach a final agreement at an extraordinary meeting to be held November 20.

Juncker praised the reforms and budget cuts made by Greek authorities, as did Christine Lagarde, the head of the International Monetary Fund, and Olli Rehn, the EU's monetary affairs commissioner. He also added that the meeting discussed giving the country two more years to 2022 to reform its economy.

The officials said Greece has only a few more actions it needs to take before getting the next €31.5 billion(NZ$48b) instalment of its bailout loan. They did not specify the actions.

A draft document obtained by The Associated Press Monday (before the meeting ended) from Greece's so-called troika of creditors - the European Central Bank, the European Commission and the International Monetary Fund - recommends giving Athens two more years until 2016 to implement the reforms necessary to restart growth and bring their debts down to a sustainable level. Ahead of Monday's meeting of the 17 eurozone finance ministers in Brussels, Irish Finance Minister Michael Noonan said that the extension would cost between €31 billion and €32b.

The troika has already pledged €240b in bailout loans to keep Greece afloat while Athens implements economic reforms and austerity measures to get its finances in order. The country has received around €150b of those loans so far.

Greece is waiting for the next €31.5b instalment of its bailout loan before it faces a bond repayment Friday that it may not be able to afford otherwise. It has passed a series of spending cuts and reforms this week to meet the conditions of the loan. But in recent months, it has become clear that country's bailout programme is way off track, and deep disagreements persist among its creditors on how to right it.

The main aim of the bailout programme is to get Greece back to a point where it no longer relies on international aid and can raise money on the debt markets. But the Greek government has been asking its creditors for more time to reach that goal- hoping that a slower pace will release the stranglehold the cuts have on the economy.

The country is currently mired in a deep recession heading into its sixth year, with more than a quarter of Greeks unemployed. Without growth, Greece can't ever hope to collect enough in taxes to put a dent in its debts. In fact, current projections suggest the country has no hope of reaching the programme's goal of bringing its debts down to 120 per cent of GDP by 2020 - a level generally considered sustainable.

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The issue of Greece's debt is a divisive and important one. If Greece's debts can't be reduced to a level where the country no longer relies on further international bailouts, then the billions of euros in bailout loans already agreed for Greece will have been wasted. But easing up on the timeline will cost more money, and politicians in other countries are nervous they won't be able to sell that to voters. Some countries are also irritated that Greece has consistently missed the deadlines set for it.

Many economists are suggesting that Greece will never reduce its debts to a manageable level unless its eurozone creditors agree to take losses on some of their loans. Private creditors have already wiped out more than €100b of Greek debt.

- AP

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