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Brussels - Greece's international lenders failed for the second week running to agree how to get the country's debt down to a sustainable level and will have a third go at resolving their most intractable problem in six days' time.
After nearly 12 hours of talks through the night during which myriad options were discussed, euro zone finance ministers, the International Monetary Fund and the European Central Bank failed to reach a consensus, without which emergency aid cannot be disbursed to Athens.
"We are close to an agreement but technical verifications have to be undertaken, financial calculations have to be made and it's really for technical reasons that at this hour of the day it was not possible to do it in a proper way and so we are interrupting the meeting and reconvening next Monday," Eurogroup chairperson Jean-Claude Juncker told reporters.
"There are no major political disagreements," he said.
Nonetheless, the euro extended its fall against the dollar in response.
A document prepared for the meeting and seen by Reuters declared that Greece's debt cannot be cut to 120% of GDP by 2020, the level deemed sustainable by the IMF, unless euro zone member states write off a portion of their loans to Greece.
The 15-page document, circulated among ministers, set out in black-and-white how far off-track Greece is in reducing its debt to the IMF-imposed target, from a level of around 170% of GDP now.
The document set out various ways Greece's debt could be reduced between now and 2020, but concluded they would not be enough without euro zone creditors taking a hit on their own holdings - something Germany and others have said would be illegal.
The document did say Greek debt could fall to 120% of GDP two years later - in 2022 - without having to impose any losses on euro zone member states or forcing through a buy-back of Greek debt from private-sector bondholders.
But International Monetary Fund chief Christine Lagarde rejected such an extension at similar talks last week.
Without any corrective measures the document said Greek debt would be 144% in 2020 and 133% in 2022, figures first reported exclusively by Reuters last week.
"To bring the debt ratio down further, one needs to take recourse to measures that would entail capital losses or budgetary implications for euro area member states," the document says.
"Capital losses do not appear to be politically feasible and would jeopardise, at least in a number of member states, the political and public support for providing financial assistance."
Juncker said at a meeting a week ago that he wanted to extend the target date to reduce Greek debt by two years to 2022, but Lagarde insists the 2020 goal should stand.
The view of the IMF, which has played a role in both Greek bailouts so far, is critical since it provides international legitimacy and credibility for the efforts the euro zone is making. If the IMF were to withdraw its support for the bailout programmes, it could have a deeply damaging market impact.
The document appeared designed in part to convince the IMF that Greek debt could be made sustainable just two years behind schedule if only it would soften its stance.
It remains possible that Lagarde could provide further wiggle room, but she is believed to favour the idea of euro zone member states taking a writedown on some of the loans extended to Greece in order to stick to the 120% in 2020 goal.
Debt buy-back
Among the main measures under consideration to bring Greece's debt burden down as rapidly as possible is a debt buy-back under which Greece would offer to purchase bonds from private investors at a discount to their nominal value.
Several options are under consideration, officials have said and the document makes clear, including using about €10bn to buy back bonds at between 30 cents and 35c in the euro.
There are also proposals to reduce the interest rate on loans already extended by euro zone countries to Greece, to impose a moratorium on interest payments and lengthen the maturities on loans, all of which would cut the debt burden.
Pressure for the euro zone to come up with a solution is high not just because Greece is running out of money and financial markets want a dependable solution, but because Athens has initiated virtually all the steps demanded of it to cut spending, raise taxes and overhaul its economy.
"Greece has delivered. Now it's up to us to deliver," Juncker said.
Because of the latest delay, the ministers were unable to give a go-ahead for the next tranche of up to €44bn of emergency funds to be paid to Athens.
The payment would provide short-term relief to Athens, but it is long-term debt that is the core issue.
The European commissioner for economic affairs, Olli Rehn, said as he arrived for the meeting that the euro zone should be ready to do more for Greece in the coming years, an apparent nod to the idea of government-sector debt writedowns.
"It's essential now that we take a decision on a set of credible measures on debt sustainability and, at the same time, we need to be ready to take further decisions in the light of future developments," Rehn said.
He did not elaborate, but the idea of a haircut on official loans is off the table for now because many countries, including Germany, see it as politically and legally impossible.
After nearly 12 hours of talks through the night during which myriad options were discussed, euro zone finance ministers, the International Monetary Fund and the European Central Bank failed to reach a consensus, without which emergency aid cannot be disbursed to Athens.
"We are close to an agreement but technical verifications have to be undertaken, financial calculations have to be made and it's really for technical reasons that at this hour of the day it was not possible to do it in a proper way and so we are interrupting the meeting and reconvening next Monday," Eurogroup chairperson Jean-Claude Juncker told reporters.
"There are no major political disagreements," he said.
Nonetheless, the euro extended its fall against the dollar in response.
A document prepared for the meeting and seen by Reuters declared that Greece's debt cannot be cut to 120% of GDP by 2020, the level deemed sustainable by the IMF, unless euro zone member states write off a portion of their loans to Greece.
The 15-page document, circulated among ministers, set out in black-and-white how far off-track Greece is in reducing its debt to the IMF-imposed target, from a level of around 170% of GDP now.
The document set out various ways Greece's debt could be reduced between now and 2020, but concluded they would not be enough without euro zone creditors taking a hit on their own holdings - something Germany and others have said would be illegal.
The document did say Greek debt could fall to 120% of GDP two years later - in 2022 - without having to impose any losses on euro zone member states or forcing through a buy-back of Greek debt from private-sector bondholders.
But International Monetary Fund chief Christine Lagarde rejected such an extension at similar talks last week.
Without any corrective measures the document said Greek debt would be 144% in 2020 and 133% in 2022, figures first reported exclusively by Reuters last week.
"To bring the debt ratio down further, one needs to take recourse to measures that would entail capital losses or budgetary implications for euro area member states," the document says.
"Capital losses do not appear to be politically feasible and would jeopardise, at least in a number of member states, the political and public support for providing financial assistance."
Juncker said at a meeting a week ago that he wanted to extend the target date to reduce Greek debt by two years to 2022, but Lagarde insists the 2020 goal should stand.
The view of the IMF, which has played a role in both Greek bailouts so far, is critical since it provides international legitimacy and credibility for the efforts the euro zone is making. If the IMF were to withdraw its support for the bailout programmes, it could have a deeply damaging market impact.
The document appeared designed in part to convince the IMF that Greek debt could be made sustainable just two years behind schedule if only it would soften its stance.
It remains possible that Lagarde could provide further wiggle room, but she is believed to favour the idea of euro zone member states taking a writedown on some of the loans extended to Greece in order to stick to the 120% in 2020 goal.
Debt buy-back
Among the main measures under consideration to bring Greece's debt burden down as rapidly as possible is a debt buy-back under which Greece would offer to purchase bonds from private investors at a discount to their nominal value.
Several options are under consideration, officials have said and the document makes clear, including using about €10bn to buy back bonds at between 30 cents and 35c in the euro.
There are also proposals to reduce the interest rate on loans already extended by euro zone countries to Greece, to impose a moratorium on interest payments and lengthen the maturities on loans, all of which would cut the debt burden.
Pressure for the euro zone to come up with a solution is high not just because Greece is running out of money and financial markets want a dependable solution, but because Athens has initiated virtually all the steps demanded of it to cut spending, raise taxes and overhaul its economy.
"Greece has delivered. Now it's up to us to deliver," Juncker said.
Because of the latest delay, the ministers were unable to give a go-ahead for the next tranche of up to €44bn of emergency funds to be paid to Athens.
The payment would provide short-term relief to Athens, but it is long-term debt that is the core issue.
The European commissioner for economic affairs, Olli Rehn, said as he arrived for the meeting that the euro zone should be ready to do more for Greece in the coming years, an apparent nod to the idea of government-sector debt writedowns.
"It's essential now that we take a decision on a set of credible measures on debt sustainability and, at the same time, we need to be ready to take further decisions in the light of future developments," Rehn said.
He did not elaborate, but the idea of a haircut on official loans is off the table for now because many countries, including Germany, see it as politically and legally impossible.
