Greece and its European creditors on Monday failed to clinch a deal that would have seen the cash-strapped country get its next batch of bailout loans and secure an agreement on the sort of debt relief measures it can expect when its current bailout program ends next year.
However, Eurogroup President Jeroen Dijsselbloem said that a broad settlement involving both the next payout and the outlines of a debt relief deal is close and could be reached in three weeks when finance ministers from the 19 countries from the single currency bloc meet next in Luxembourg.
While hailing the recent progress the Greek authorities have made to implement the reforms and cuts demanded from creditors, Dijsselbloem said certain issues still needed to be addressed.
However, time is running out for Greece, as without the rescue loans it would struggle to meet a big repayment hump in July of about 7 billion euros (US$7.8 billion).
“We have made huge progress on the policy package on which so much work has been done,” Dijsselbloem said.
“A lot of work has already been done in Greece by the Greek government and they are committed to continue that work as soon as possible so that we can work towards that next disbursement before the summer,” he said.
One of the major stumbling blocks has centered on a divergence of opinion between the eurozone and the IMF, which is not involved financially in Greece’s current three-year bailout program agreed on in the summer of 2015 and which could be worth up to 86 billion euros in total.
Germany and the Netherlands have indicated that they will refuse to lend more money to Greece without the IMF’s participation.
The IMF has said that the eurozone forecasts underpinning the Greek bailout are too rosy and that the country as a result should get substantial debt relief so it can start growing on a sustainable basis following a depression that has seen the economy shrink by a quarter, while unemployment and poverty levels have risen sharply.
While the eurozone has ruled out any debt write off, it has indicated that extending Greece’s repayment periods or reducing the interest rates on its loans are possible at the conclusion of the bailout next year.
The protracted nature of Greece’s bailout program has been costly for the country.
Although Greece emerged from an economic depression in 2014, the economy is back in recession, having shrunk for two straight quarters.
Analysts say the main reason Greece has taken a step back is its stalled bailout negotiations.
“The expectation is that we can reach an agreement within the next three weeks,” Greek Minister of Finance Euclid Tsakalotos said.
While austerity measures over the seven years of its bailout era have seen Greece’s annual budget position improve markedly, the country’s debt burden stands at about 180 percent, a level that the Greek government thinks is unsustainable in the long-term — hence its insistence on some debt relief, at least in the form of lower interest payments and longer repayment terms.
The government of Greek Prime Minister Alexis Tsipras had hoped that a package of measures, including further spending cuts and economic reforms, passed by lawmakers last week, would have been enough to break the logjam at Monday’s meeting and allow the eurogroup to release the next bailout installment.
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