Greece’s lenders fail again to clinch debt deal

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 major divisions remain, according to Reuters.

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 urgently needed loan tranche 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.

But German Finance Minister Wolfgang Schaeuble told lawmakers at a closed-door meeting in Berlin that the lenders were split over several key issues including 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 Wednesday’s meeting of Chancellor Angela Merkel’s centre-right Christian Democrats in parliament.

Merkel herself told the lawmakers the gap could be plugged by lowering interest rates on loans to Greece and increasing guarantees provided to the euro zone’s temporary EFSF bailout fund, in which Germany would take its share, a participant said.

Greece needs the next 31 billion euro aid tranche to keep servicing its debt and avoid bankruptcy. Its next major repayment is in mid-December.

Athens says it has carried out the tough reforms required in the bailout program but needs more time to reach fiscal targets agreed with its lenders because its economy has continued to shrink.

European governments want to give Greece an extra two years, until 2022, to cut its debt to a sustainable level but the IMF does not agree. The Europeans, led by Germany, are refusing to write off any loans. Both options would make it easier for Greece to meet the targets in the bailout program.

“Greece did what it had committed it would do. Our partners, together with the IMF, also have to do what they have taken on to do,” Prime Minister Antonis Samaras said in a statement.

“Any technical difficulties in finding a technical solution do not justify any negligence or delays.”

Samaras will meet Juncker in Brussels on Thursday and has cancelled a trip to Qatar next week to monitor the talks, a government spokesman said.

Germany and other EU states say writing down their loans would be illegal. The European Central Bank, a major holder of Greek bonds, has refused to take a “haircut” on its holdings.

Berlin contends a debt haircut would not tackle the roots of Greece’s debt problems and would be unfair to other euro zone countries that have taken tough steps to improve their finances.

“It would cost money, it would be a fatal signal to Ireland, Portugal and possibly Spain, as they would immediately ask why they should accept difficult conditions and push through difficult measures…and it would have consequences under budget law,” Norbert Barthle, budget spokesman for German Chancellor Angela Merkel’s Christian Democrats said.

Without corrective measures, the Eurogroup document said, Greek debt would be 144 percent in 2020 and 133 percent in 2022.

Juncker said after 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. She is believed to favor euro zone member states taking a write down.

R.S