Hopes for a breakthrough in negotiations for cash-strapped Greece were dashed again and another deadline was set.
Greece once again failed to get approval from its European creditors to receive the next batch of bailout loans that it needs to meet a debt repayment hump this summer. It also failed to secure an agreement on the sort of debt relief measures it can expect to get when its current bailout program ends next year.
Without the loans, Greece faces another brush with bankruptcy. The Greek government had hoped that Monday night’s meeting of the eurozone’s 19 finance ministers would at least have seen it cleared to get the money. After all, it legislated for further cuts and reforms last week to meet creditor demands.
Still officials tried to put a brave face on the stalemate.
“It would be preferable to postpone a decision for a few days, which would give us time to work harder and prepare a better solution, than to take decisions that just move the problem on and do not offer a clear way out,” Greek government spokesman Dimitris Tzanakopoulos said Tuesday.
The eurozone’s top official Jeroen Dijsselbloem said a broad settlement involving both the next payout and the outlines of a debt relief deal is close, and could be reached in three weeks when finance ministers from the 19 countries from the single currency bloc meet next in Luxembourg on June 15.
Several eurozone officials though, had said as much before Monday’s meeting, too.
While hailing the recent progress the Greek authorities have made to implement the reforms and cuts demanded from creditors, Dijsselbloem said certain issues still needed to be addressed. But time is running out for Greece as without the rescue loans it would struggle to meet a big repayment in July of some 7 billion euros ($7.8 billion).
The executive Commission, which is one of the overseers of Greece’s bailout, sought to downplay fears that Greece was heading for another financial crisis.
“We are convinced that Greece has delivered,” said Margaritis Schinas, the Commission’s spokesman. “Now it is up to its partners to do the same.”
One of the major stumbling blocks has centered on a divergence of opinion between the eurozone and the International Monetary Fund, which is not involved financially in Greece’s current three-year bailout program which was agreed in the summer of 2015 and which could be worth up to 86 billion euros in total.
Getting the IMF on board is important as Germany and The Netherlands have indicated that they will refuse to lend more money to Greece without the Fund’s participation.
The IMF has argued that the eurozone forecasts underpinning the Greek bailout are too rosy and that the country as a result should get substantial debt relief so it can start growing on a sustainable basis following a depression that’s seen the economy shrink by a quarter and unemployment and poverty levels ratchet up sharply. While the eurozone has ruled out any debt write-off, it has indicated that extending Greece’s repayment periods or reducing the interest rates on its loans are possible at the conclusion of the bailout next year.
While austerity measures over the past seven years have seen Greece’s annual budget position improve markedly, the country’s debt burden stands at around 180 percent, a level that the Greek government and the IMF think is unsustainable in the long-term — hence the insistence on some debt relief.
Dijsselbloem said the IMF welcomes the progress made by Greece, and is “impressed” by the reforms undertaken by Greece and that it stands ready to go to the board to get involved financially.
Though the history of Greece’s various scrapes with bankruptcy over the past seven years of its bailout era shows how matters can easily spiral out of control, the prevailing view in markets is that despite some caution, Greece will get its deal.
“Despite some disappointment this time, a deal is clearly in the making,” said Lorenzo Codogno, chief economist of LC Macro Advisors. “The baseline scenario is for a deal at the June 15 Eurogroup meeting, with sufficient debt relief to allow the IMF to stay attached.”
The protracted nature of Greece’s bailout program has been costly for the country. Though Greece emerged from its economic depression in 2014, the economy is back in recession, having shrunk for two straight quarters. Analysts say the main reason why Greece has taken a step back is its stalled bailout negotiations.