Eurozone fails to reach Greece debt deal amid IMF row

Greek finance minister Euclid Tsakalotos [L] and his Spanish colleague Luis Guindos. [Council]

Eurozone finance ministers failed to reach a deal for fresh bailout cash for Greece yesterday (22 May), as a row with the International Monetary Fund over debt relief dragged on.

After more than eight hours of talks in Brussels, ministers from the 19-member single currency bloc could not settle deep differences on debt relief pitting Germany, the eurozone’s most powerful member, against the IMF.

“I think we are very close to that agreement, but tonight we were unable to close a possible gap between what could be done and what some of us had expected should be done or could be done,” Eurogroup president Jeroen Dijsselbloem told a news conference.

He said talks would resume at the next meeting of finance ministers in June.

“We were very close, just unable to manage it tonight,” Dijsselbloem said.

Hopes were high that the eurozone could agree on the debt question and unlock cash after Greek lawmakers on Thursday fulfilled the latest demands for painful austerity measures.

The fresh reforms were to open the way to unlock the latest tranche of Greece’s 2015 mega-bailout so that Athens can make a debt payment of €7.0 billion in July.

“We indeed did not conclude, but our work will not be wasted,” said EU Economic Affairs Commissioner Pierre Moscovici after the marathon talks.

The IMF has made more debt relief a condition of taking part in Greece’s third and latest €86-billion bailout, agreed two years ago.

‘Wit of man’

Greece’s debt mountain stands at a towering 180% of annual output, the legacy of a crisis that brought panic to the markets and nearly forced the country out of the euro.

The new delay on fresh aid and debt relief will infuriate the Greek government, which pushed through the tough reforms to be ready for Monday’s talks.

“It should not be beyond the wit of man to find an agreement,” Greek Finance Minister Euclid Tsakalotos said after the crunch talks.

Newly elected French President Emmanuel Macron said he backed debt relief for Greece in a phone call on Monday with Greek Prime Minister Alexis Tsipras.

Macron told Tsipras he was in favour of “finding a deal soon to alleviate the weight of Greece’s debt over time,” a statement from the presidency said.

But Macron’s position put him at odds with Germany where Greek debt relief – following three different bailouts since 2010 – is seen as a vote loser ahead of general elections in September.

‘Germany ready’

Led by tough negotiator and former French finance minister Christine Lagarde, the IMF says Greece’s debt is unsustainable and will be “explosive” in the long run, requiring a more ambitious plan from Europe.

This would include dramatically extending grace periods and maturities on the loans far beyond what the eurozone has committed to so far.

The question has served as a point of contention for months between the IMF and German Finance Minister Wolfgang Schäuble, but sources close to the negotiations said Berlin made concessions on the issue.

Schäuble opposes debt relief, but at the same time refuses to unlock more loans to Greece without the partnership of the IMF, which he sees as a guarantor of financial rigour.

France’s new finance minister, Bruno Le Maire, said: “Everyone must make a step. Germany was among those ready to do so.”

But the IMF remained unsatisfied with the deal on the table, sources close to negotiations said.

The meeting was the first for Le Maire, who was named to his post last week by Macron, a pro-EU centrist.

Le Maire attended the Brussels talks after a morning stop in Berlin where he met Schäuble, with the pair agreeing to speed up eurozone integration.

Germany and France are Greece’s biggest lenders.

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