Euro finance chiefs left unanswered how they’ll fill a fresh hole in Greece’s balance sheet without tapping their own bailout-weary taxpayers for money after giving the country two extra years to trim its budget deficit.
In the latest compromise in three years of crisis fighting, creditors led by Germany opted late yesterday to keep money flowing to Greece instead of risking a default that could lead to the nation’s exit from the euro and stir more turmoil for the countries that remain in the single-currency bloc.
The extra financing need was triggered by a decision to give Greece two more years, until 2016, to cut the deficit to 2 percent of GDP. Refusal by the IMF to pitch in would increase the cost for European governments, led by Germany, the dominant lender to Greece and three other countries -- Ireland, Portugal and Spain -- that have fallen back on international aid.
The likely outcome is “a typical euro-zone fudge,” said Carsten Brzeski, an economist at ING Group NV in Brussels. “Needless to say, the final decision on the next Greek tranche, a new financing gap and debt sustainability will not be the end of the matter.”