International lenders have agreed fresh steps to reduce Greece’s debt pile further but it still has to fill a 10 billion euro (US$13 billion) gap to gain the International Monetary Fund’s approval for its next tranche of aid, a senior Greek government official said yesterday.
The IMF has agreed to deem the country’s debt viable if it falls to 124 percent of GDP in 2020, giving ground on its earlier target of 120 percent, the official said on condition of anonymity.
“The euro group has already agreed on measures to reduce Greek debt to 130 percent of GDP in 2020, so that leaves a gap of 5-6 percentage points of GDP to be covered — about 10 billion euros,” he said.
The official did not disclose what measures had been identified that would reduce the lenders estimate of public debt in 2020 from a previous 144 percent of GDP.
Another senior source involved in the negotiations confirmed that the IMF would now accept 124 percent as a target but said that to say the remaining gap only amounted to 10 billion euros was much too optimistic.
According to current government projections, Greek debt is seen at 340.6 billion euros, or 175.6 percent of GDP at the end of this year. It is expected to peak at 357.7 billion euros, almost 191 percent, in 2015.
Greece’s international lenders failed earlier this week to agree how to get the country’s debt down to a sustainable level and will have a third go at resolving their most intractable problem on Monday.
According to a document circulated at that meeting, Greece’s debt cannot be cut to 120 percent of GDP by 2020, unless eurozone member states write off a portion of their loans to Greece, which Germany has consistently said would be illegal.
Separately, Cyprus is close to agreeing a bailout package with the EU and IMF, Cypriot President Demetris Christofias said on Thursday after the latest round of talks with the international lenders.
Two EU sources said the agreement was nearly done but would be completed yesterday, when inspectors from the European Commission, European Central Bank and IMF — together known as the troika — were likely to give their approval.
The Commission, asked about reports that a deal had been agreed, said it would only issue a statement on Cyprus yesterday.
Cyprus sought financial aid — which could be up to 17.5 billion euros, equal to its entire GDP — from the EU and IMF in June, after its banks were battered by their exposure to the Greek crisis.
“After tough negotiations with the troika ... we are very close to signing a memorandum,” Christofias said in a statement. “Very few issues remain and it’s possible that the gaps in these issues will be bridged very soon.”
The troika team left Cyprus on Thursday. It said in a draft statement that it had made “good progress” and discussions aimed at “a potential program” would continue from their respective headquarters.