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Euro finance ministers to discuss Greece's future

Published November 12, 2012 9:58 am

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Brussels • Greece's international creditors appeared split Monday on whether they were ready to take decisive action to help Greece dig out of its mountain of debt and get back on the path to growth.

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 reforms this week to meet the conditions of the loan. But in recent months, it has become clear that country's bailout program is way off track, and deep disagreements persist among its creditors on how to right it. Those disputes have been partly responsible for holding up the disbursement of the latest batch of loans.

Jean-Claude Juncker, head of the group of finance ministers from the 17 euro countries, said Monday that Greece's international creditors have prepared a "positive" report assessing Greece's progress — but it is not complete. It doesn't address the crucial question of debt sustainability.

He spoke as he headed into a meeting of the finance ministers that is expected to tussle with that question. Current projections suggest Greece won't make the 2020 deadline for slashing its debt to 120 percent of its GDP.

Germany's finance minister, Wolfgang Schaeuble, said Greece can't receive the next installment of its bailout loan until that problem is solved.

"We first have to see if Greece has delivered," he said, as he headed into the meeting Monday. "I have not seen this."

Still, French Finance Minister Pierre Moscovici said the ministers had to reach some sort of over-arching agreement on how to move forward on Greece.

"I hope tonight we can find a political agreement in order to say we can go on with the Greek program, let's put the problems behind us and let's rebuild confidence in the eurozone," he said.

He added that the ministers couldn't ignore the tremendous sacrifices Greece had made in recent days, approving a raft of reform measures and an austerity budget for next year.

"There were these votes, they were courageous," Moscovici said. "We shouldn't turn a deaf ear."

Christine Lagarde, president of the International Monetary Fund, sounded a similar note. "Greece has done an awful lot of work, and now it is time for the creditors to do the same," she said. What the country needs, she said, was "not a quick fix but a real fix."

The issue of Greece's debt is a divisive and important one. If Greece's debts can't be reduced to a level where the country no longer relies on further international bailouts, then the $305 billion in bailout loans already agreed for Greece will have been wasted. Current projections suggest Greece is far from reaching its 2020 debt-to-GDP deadline.

Greece has been asking for more time to implement reforms and budget cuts — hoping that a slower pace will release the stranglehold such cuts have on the economy. The country is mired in a deep recession heading into its sixth year, with more than a quarter of Greeks unemployed.

Without growth, Greece can't ever hope to collect enough in taxes to put a dent in its debts. But easing up on the timeline will cost more money, and politicians in other countries are nervous they won't be able to sell that to voters. Some countries are also irritated that Greece has consistently missed the deadlines set for it.

Many economists have argued that the country doesn't just need more time but an outright reduction in its debt, with its Eurozone creditors agreeing to take losses on some of their loans.

Moscovici and other ministers declined to comment on whether their countries would agree to wipe out some of the debt they hold.

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

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Associated Press writers Raf Casert in Brussels and Geir Moulson in Berlin contributed. Don Melvin can be reached at http://twitter.com/Don—Melvin