Greece says debt viability deal round the corner

Nov 24 2012, 02:39 IST
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SummaryThe International Monetary Fund has relaxed its debt-cutting target for Greece and only a 10-billion euros gap remains to be filled for a vital aid tranche to be paid, Greece’s finance minister said on Friday.

The International Monetary Fund has relaxed its debt-cutting target for Greece and only a 10-billion euros ($13 billion) gap remains to be filled for a vital aid tranche to be paid, Greece’s finance minister said on Friday.

But other sources involved in the talks cautioned that the funding gap was far bigger than that suggested by Greece and that the two sides were not on the verge of striking a deal to resolve the euro zone’s most intractable problem.

Greece’s finance minister signaled that a compromise was near by saying the International Monetary Fund had agreed to deem the country's debt viable if it falls to 124% of the GDP in 2020, giving ground on its earlier target of 120%.

“The Eurogroup has already agreed on measures to reduce Greek debt to 130% of GDP in 2020,” Yannis Stournaras said.

“That leaves a gap of 5-6 percentage points of GDP to be covered — about 10 billion euros,” he told reporters in Brussels. “The EU and IMF are considering bringing the debt down through a combination of interest rate cuts and extension of maturities on the country’s loans, a debt buyback and having the ECB forego profits on its Greek bond holdings,” a Greek finance ministry official told Reuters.

Teetering on the verge of bankruptcy, Greece is increasingly frustrated that its lenders are still squabbling over a deal to unlock fresh aid despite the country pushing through unpopular austerity cuts that brought thousands on to the streets.

Athens says time is running out and that it needs its next tranches of almost 44 billion euros in aid to recapitalise banks and stabilise its recession-hit economy. Its next big debt repayment falls due in mid-December.

It expects the aid to be paid out in one instalment, Greece’s government spokesman told Greek radio, playing down recent speculation that it could be dribbled out in bits.

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