No Deal Yet on Greek Debt Reduction

Euro finance ministers to reconvene Monday.

European finance ministers failed to agree on a debt-reduction package for Greece after battling with the International Monetary Fund over how to nurse the recession- wracked country back to fiscal health.

With creditors led by Germany refusing to put up fresh money or offer debt relief, the finance chiefs were unable to scrape together enough funds from other sources to help alleviate Greece’s debt burden, set to hit 190 percent of gross domestic product in 2014.

Funding Gap

Schaeuble told German lawmakers this morning that the issue of the Greek funding gap was solvable and possible solutions include reducing interest payments on its initial bailout loans, suspending payouts through 2020 on its second rescue package, or having the ECB buy 9 billion euros of the country’s Treasury bills, according to four people who attended the briefing. Another option is for the EU’s temporary bailout fund to finance the Greek government in buying back 10 billion euros of its bonds.

Deficit Extension

The clash with the IMF was triggered by the ministers’ decision last week to grant Greece two extra years, to 2016, to cut the deficit to 2 percent of gross domestic product. While designed to address Greece’s growth problem, that gesture forced the country to take on extra debt to plug the higher deficits.

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