Some want to extend Greece’s debt-fix time

A homeless person sleeps on a subway ventilation grill Monday in Athens as commuters enter Syntagma station. Greece is waiting for the next $40 billion installment of its bailout loan before it faces a bond repayment due Friday.

A homeless person sleeps on a subway ventilation grill Monday in Athens as commuters enter Syntagma station. Greece is waiting for the next $40 billion installment of its bailout loan before it faces a bond repayment due Friday.

Tuesday, November 13, 2012

— Greece’s international creditors are proposing that they grant the country two more years to meet its debt-reduction targets as the country enters its sixth consecutive year of recession, according to a draft document The Associated Press obtained Monday.

But the draft memorandum of understanding lacked crucial specifics on how much additional assistance the country would need and how that shortfall should be addressed, as the finance ministers from the 17 countries that use the euro gathered in Brussels to discuss Greece’s situation.

Representatives of creditor governments said they won’t be rushed into easing up on Greece. On his way into the meeting, Finance Minister Wolfgang Schaeuble of Germany, the biggest contributor to the European bailouts, said the priority is on “thoroughness” and added that Germany’s stance will be dictated by its parliament.

“The Greeks have left a lot of things until the last minute, so we’ll also take the time to consider where we are,” Dutch Finance Minister Jeroen Dijsselbloem said. He and Finnish Finance Minister Jutta Urpilainen floated the possibility of a follow-up meeting later this week.

The European Central Bank, the European Commission and the International Monetary Fund have already pledged $305 billion in bailout loans to keep Greece afloat while the Greek government works to get its finances in order.

Greece is waiting for the next $40 billion installment of its bailout loan before it faces a bond repayment Friday that it may not be able to afford without the tranche, and it has passed a series of overhauls to meet the conditions of the loan. But in recent months, it has become clear that the country’s bailout program is off track, and disagreements persist among its creditors on how to right it.

The main aim of the bailout program is to get Greece back to a point where it no longer relies on international aid and can raise money on the debt markets. It has been given a deadline of 2020 to lower its debt to 120 percent of its economic output to achieve this goal. Current projections, however, suggest Greece is nowhere near reaching that target.

The Greek government, therefore, has been asking its creditors for more time so that it can become self-sufficient without inflicting yet greater damage on its ailing economy. The country is currently mired in a deep recession heading into its sixth year, with more than a quarter of Greeks unemployed.

“The two-year extension of the adjustment period will mitigate the impact on the economy, while securing a sustainable fiscal position,” the draft document stated.

Jean-Claude Juncker, who is chairman of the group of eurozone finance ministers, said Monday that Greece’s creditors have prepared a “positive” report assessing Greece’s progress, but acknowledged that it is not complete.

The Greek report doesn’t address the crucial question of Greece’s debt sustainability. Many analysts have said a two-year extension to the debt reduction target could require as much as $38 billion in fresh assistance, or granting Greece a reduction in what it owes - meaning its eurozone creditors will have to agree to take losses on some of their loans.

Austrian Finance Minister Maria Fekter said she can’t imagine European taxpayers giving Greece additional funds.

“More time means more money,” Fekter said before the meeting in Brussels. “I can’t imagine that the other states, that the ministers go to their own taxpayers and that the parliaments decide new packages for Greece that cost even more.”

Fekter called for “more creativity” should Greece require more time, saying she wanted a solution for Greece that would be “sustainable and manageable” for taxpayers. “I doubt if we’ll be able to decide something today,” she said.

French Finance Minister Pierre Moscovici and other ministers declined to comment on whether their countries would agree to wipe out some of the debt they hold as they headed into the meeting in Brussels.

Whatever the outcome of Monday’s talks, no final decision on giving Greece the $40 billion loan will be made because some eurozone parliaments must approve the deal first.

Lawmakers in Germany said a vote could be held next week.

IMF Managing Director Christine Lagarde didn’t show her hand Monday. Arriving at the Brussels meeting, she said the Washington-based lender will play its part in a solution, adding that Greece needs a “real fix,” not a “quick fix.” Information for this article was contributed by Sarah DiLorenzo and Juergen Baetz of The Associated Press and by Brian Parkin, Rainer Buergin, James G. Neuger and Zoe Schneeweiss of Bloomberg News.

Business, Pages 21 on 11/13/2012