Euro officials seek way to unlock Greek crisis
Published Monday, November 26, 2012 6:44AM EST
Last Updated Monday, November 26, 2012 5:24PM EST
BRUSSELS, Belgium -- Finance ministers from the 17 European Union countries that use the euro were poised for another marathon negotiating session trying to hammer out a deal late Monday on the next installment of bailout money for struggling Greece.
The ministers have failed twice in the last two weeks to reach an agreement to release some C44 billion ($56.8 billion) for the cash-strapped country.
Greece is living on borrowed time -- it still owes money it was supposed to repay last week.
Olli Rehn, the EU's top financial official, said it was important for the ministers and the International Monetary Fund to agree on a deal. Distributing the next batch of loans was essential, he said, "in order to end the uncertainty that's still hanging over Greece. It's important for Greece, important for Europe."
"I want to encourage all the euro area member states and the IMF to go the last mile to find an agreement -- in fact to go the last centimetre, because we are so close," Rehn said.
"Greece has delivered. Now it is the delivery time for the eurogroup and the IMF."
Even though several officials said the remaining differences were small, negotiations dragged well into the evening.
The so-called troika of the European Central Bank, IMF and the European Commission, which is the 27-country EU's executive arm, have twice agreed to bail out Greece, pledging a total of C240 billion in rescue loans -- of which the country has received about C150 billion so far. In return for its bailout loans, Greece has had to impose several rounds of austerity measures and submit its economy to scrutiny.
Greece's fortunes are inextricably tied to the rest of the eurozone. Without the bailout funds that have been keeping it afloat since May 2010, the country would default and could end up having to leave the eurozone. This could have a domino effect on other financially troubled eurozone nations.
Greek Finance Minister Yannis Stournaras said action needed to be taken.
"Greece has fully delivered its part to the agreement, so we expect our partners to deliver their part, too, and I am sure we will find a mutually beneficial solution," he said.
But the prospect of yet another batch of bailout money left some ordinary Greeks unimpressed.
"Did we get anything from any of the previous loan installments?" asked Eleni Myronidou, a retiree in Athens. "Did the people get anything? The banks did. It's all about the banks. Nothing for the people. They should be ashamed of themselves. They should be ashamed."
Greece is unlikely to complete its program of budget cuts and reforms by 2014. For this reason, it is likely to be given an additional two years by the troika. But that extension will cost several billion more, and it is disagreements over how to fund this that have stopped Greece from getting its money.
Several proposals have been floated as ways to plug the financial hole. These include reducing the interest rate Greece pays on its loans from euro partners, lenders such as the ECB giving up interest or profit on their loans, a debt buyback that would reduce the country's burden in the long term, and debt forgiveness by some other countries in the eurozone.
But most of those solutions involved dipping once again into the pockets of taxpayers -- something that has become increasingly unpalatable politically.
"There have been disputes in recent weeks among the members of the troika," said Craig Erlam, an analyst at Alpari. "However these are expected to be resolved today, meaning Greece will finally receive the next bailout payment. If not, Greece could run out of money in the coming days, the consequences of which could be disastrous for the eurozone."
The troika partners disagree on whether Greece should be given an extra two years, to 2022, to bring its debt down to 120 per cent of gross domestic product from the 176 per cent forecast for this year. The IMF has resisted such an extension.
The ministers hope to reach a political agreement Monday. That agreement will have to be submitted to national parliaments in some countries. After that, the finance ministers plan to hold another meeting, either in person or by telephone, to give final approval to the disbursement.
German Finance Minister Wolfgang Schaeuble ruled out a public-sector debt write-off, and said other eurozone member countries had taken the same position.
But he said he was optimistic about the talks.
"We will find a solution, I am very confident of that," Schaeuble said.