* Greece says IMF relaxes debt/GDP target
* Only 10 bln euros away from deal - finance minister
* Sources involved in talks say gap bigger than that
By Harry Papachristou and Lefteris Papadimas
ATHENS, Nov 23 The International Monetary Fund
has relaxed its debt-cutting target for Greece and only a 10
billion euro ($13 billion) gap remains to be filled for a vital
aid installment to be paid, Greece's finance minister said on
But other sources involved in talks between euro zone
finance ministers and the IMF cautioned that the funding gap was
far bigger than suggested by Greece, and the two sides were not
on the verge of striking a deal to solve the euro zone's most
intractable problem, they said.
Finance Minister Yannis Stournaras signalled a compromise
was near by saying the IMF had agreed to declare Greece's debt
viable if it is projected to fall to 124 percent of GDP in 2020,
giving ground on its earlier target of 120 percent.
The Eurogroup of euro zone finance ministers has already
agreed on measures to reduce Greek debt to 130 percent of GDP in
2020, Stournaras said.
"That leaves a gap of 5-6 percentage points of GDP to be
covered - about 10 billion euros," he told reporters in
The EU and IMF are considering bringing the debt down
through a combination of interest rate cuts and extension of
maturities on the country's loans, plus a debt buyback and a
plan under which the European Central Bank would forego profits
on its Greek bond holdings, a Greek finance ministry official
Teetering on the verge of bankruptcy, Greece is increasingly
frustrated that its lenders are still squabbling over a deal to
unlock fresh aid even though the government has pushed through
unpopular austerity cuts that brought thousands on to the
Athens says time is running out and that it needs its next
installments of almost 44 billion euros in aid to recapitalise
banks and stabilise its economy. Its next big debt repayment
falls due in mid-December.
It expects the aid to be paid out in one installment, the
government spokesman told Greek radio, playing down recent
speculation that it could dribble out in bits.
The euro hit a three-week high against the dollar on
growing optimism that Greece's lenders were close to an
Euro zone finance ministers, the IMF and ECB failed earlier
this week to agree on how to get Greek debt down to a manageable
level and will have a third go at resolving the issue on
European paymaster Germany expressed optimism that a deal
could be struck at that meeting. "I am very hopeful that we can
reach a solution on the question of the payment of the Greece
tranches on Monday," said Chancellor Angela Merkel.
She repeated her opposition to euro zone member states
writing off a portion of their Greek bond holdings, known as a
haircut. "We reject such a debt haircut. We want to find another
solution," she told a news briefing.
Euro zone finance ministers will also hold a teleconference
on Saturday to prepare for Monday's meeting, officials said.
A senior source involved in the negotiations confirmed that
the IMF would now accept 124 percent as a target but was
dismissive of the gap amounting to only 10 billion euros.
"There are still things missing to an agreement," the source
said. "The 10 billion is too optimistic."
A Greek finance ministry official said the ECB could
relinquish 9 billion euros of profits on the Greek bonds it
holds, as part of the measures to bring debt in 2020 down from a
previous estimate of 144 percent of GDP.
Other options include saving 8 billion euros from cutting
the interest rate, extending maturities on Greek debt and
spending 10 billion euros to buy back around 30 billion euros in
debt at a deep discount.
Greece has already begun preparations for the buyback, which
could be completed by the end of the year if euro zone finance
ministers approve the move, the official said.
Current government projections put Greek debt at 340.6
billion euros, or 175.6 percent of GDP at the end of 2012. It is
expected to peak at 357.7 billion euros, almost 191 percent, in
According to a document circulated at the Eurogroup meeting,
Greece's debt cannot be cut to 120 percent of GDP by 2020 unless
euro zone governments accepted the haircut, which Germany has
said would be illegal.
The document prepared for the meeting of euro zone finance
ministers and seen by Reuters spelled out several options now
cited by Greek officials - including using about 10 billion
euros to buy back bonds at between 30 and 35 cents in the euro.
Many Greek retail bondholders are still angry about a debt
restructuring earlier this year that imposed heavy losses on
private holders of Greek debt.
About 40 retail bondholders pushed past security at the
ruling conservative New Democracy party's offices in Athens on
Friday, pelted a portrait of party founder Constantinos
Karamanlis with eggs and scuffled with guards.