More time for Greece budget reform
Published 13/11/2012 | 02:03
Greece's international creditors have failed to agree on how to get the country's bailout programme back on track and put off again the release of the next batch loans that Athens is using to pay its day-to-day bills.
European finance ministers meeting in Brussels did decide on Monday to give Greece two more years until 2016 to reform its economy - one of the conditions of its bailout package. But they could not agree on how to pay for the extension or when the country's debts would reach a manageable level.
"Today a huge step has been made in order to secure the programme on Greece, in order to enhance the confidence on the eurozone, in order to find a strong and definite solution for this question, which has lasted for more than two years now," said French finance minister Pierre Moscovici, as he left the meeting of finance ministers from the 17 countries that use the euro. "We couldn't do more today."
The European Central Bank, the International Monetary Fund and the European Commission, which is the EU's executive arm, have twice agreed to bail out Greece, pledging a total of 240 billion euro (£190 billion) in rescue loans. The country has received about 150 billion euro (£120 billion) of those loans so far, in exchange for making tough budget cuts and sweeping reforms to its labour market and bureaucracy.
The main aim of the bailout programme is to right Greece's economy and get it to a point where it no longer relies on international aid and can independently raise money on the debt markets.
The plan was supposed to steadily reduce Greece's debt until, in 2020, it reached 120% of its annual gross domestic product, a level generally considered sustainable. But it has been clear for months now that the country is way off track from achieving that goal, although how far off track is a point of contention among its lenders.
As IMF chief Christine Lagarde left the meeting, she insisted that Greece should still be aiming to bring its debts to the 120% level by the original target of 2020. But Jean-Claude Juncker, who chairs the meetings of the eurozone finance ministers said that the deadline would likely be changed to 2022.
"What matters at the end of the day is the sustainability of the Greek debt, so that country can be back on its feet and re-access the private market in due course," Ms Lagarde said.
The question of debt sustainability is as important as it is divisive: If Greece's debts can't be reduced to a level where the country can pay them down, then the billions of euro in bailout loans given to Greece will have been wasted. It has taken on even more importance in recent weeks because Germany has insisted that until the question is resolved, Greece can't receive its next 31.5 billion euro (£25 billion) batch of its bailout loans.
The country has a bond payment coming due this week, but EU finance commissioner Olli Rehn said Athens would be able to roll it over and did not need the loan instalment. The issue appears to have ultimately derailed Monday's meeting, and so the ministers will meet again on November 20 in order to release the next batch of bailout loans.