EU finance ministers were unable to seal a deal on the release of the next tranche of EU/IMF bailout funding, despite 12 hours of discussions in Brussels yesterday. The finance ministers still have some technical details to iron out and will reconvene on Monday. It was just as well that Greece was able to meet its immediate financial needs by securing the money from the markets on Tuesday of last week.
Under the chairmanship of Jean-Claude Juncker, Prime minister of Luxembourg, the Eurogroup (Eurozone finance ministers) have been discussing how to tame Greece’s public debt – presumably without triggering revolution on the streets of Athens. Greek debt is projected to rise to 189% of the nation’s GDP next year. The agreed bailout programme seeks to bring debt down to 120% of GDP by the year 2020.
Whilst the EU broadly supports Greece’s request that it should be given an additional two years to meet the debt reduction target, the IMF is reluctant to do so. However, Christine Lagarde, the managing director of the IMF reiterated that: "We're going to work very constructively to see if we can find a solution for Greece. That's what really is our goal, our purpose and our mission." For his part, Mr Junckers issued an upbeat statement on the talks: "The Eurogroup has had an extensive discussion and made progress in identifying a consistent package of credible initiatives aimed at making a further substantial contribution to the sustainability of Greek government debt".
It is all but inconceivable that an accord will not be arrived at which will allow Greece to receive the next tranche of funding. The additional two years that Greece has asked for is designed to give it some breathing space whilst highly unpopular austerity measures are implemented as it could make the required programme more palatable to Greek citizens. Given that the IMF has been urging nations not to prioritise austerity measures at the expense of growth, some form of compromise is surely attainable.