Greece's lenders fail again to clinch debt deal

Wed Nov 21, 2012 1:23pm EST
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By Andreas Rinke and Lefteris Papadimas

BERLIN/ATHENS (Reuters) - International lenders failed for the second week to reach a deal to release emergency aid for Greece and will try again next Monday, but Germany signaled that significant divisions remain.

Euro zone finance ministers, the International Monetary Fund and the European Central Bank were unable to agree in 12 hours of overnight talks in Brussels on how to make the country's debt sustainable. They want a solution before paying the next loan tranche which is urgently needed to keep Greece afloat.

Several European officials played down the delay, saying the disagreements were technical and a deal would be reached when they meet again on November 26.

German Finance Minister Wolfgang Schaeuble said he was confident the funding gap could be filled by a mixture of letting Greece buy back its own debt at a discount, tapping ECB profits on Greek bond purchases, and lowering interest rates on government loans to Athens, but not below the cost to lenders.

"Additional measures are needed and we have spoken about this intensively with the International Monetary Fund. We agree essentially that the gap can and will be filled, that a buyback program of Greek debt on the market will be carried out," he told reporters.

Schaeuble earlier told conservative lawmakers at a closed-door briefing that the lenders were split over how to define debt sustainability and fill a hole in Greek finances.

"He sees the extension of the debt sustainability goal as one of the main bones of contention. The other is how to cover the Greek financing gap of 14 billion euros through 2014," said one lawmaker who attended the meeting of Chancellor Angela Merkel's centre-right Christian Democrats in parliament.

European governments want to give Greece an extra two years, until 2022, to cut its debt to a sustainable level of 120 percent of GDP but the IMF does not agree.   Continued...

Greece's Prime Minister Antonis Samaras delivers his speech during a business presentation organised by the youths of his conservative New Democracy party in Athens November 20, 2012. REUTERS/John Kolesidis