Greece hopes for breakthrough as funding stalemate persists

ATHENS/AMSTERDAM (Reuters) - Greece said on Tuesday it wanted a positive conclusion soon to a bailout review which would allow it to tap cheap ECB funding, as a top European official ruled out imminently extending debt relief sought by the IMF for the crisis-hit nation.

The International Monetary Fund logo is seen inside its headquarters at the end of the IMF/World Bank annual meetings in Washington, U.S., October 9, 2016. REUTERS/Yuri Gripas

Discussions between Greece, its European lenders and the International Monetary Fund on the country’s bailout obligations have dragged on for months as disagreements persist over fiscal issues, labour and energy market reforms.

The IMF has sat on the sidelines of the bailout programme, Greece’s third since lurching into crisis in 2010. The Fund says it cannot participate in a programme which could keep Greece in a perpetual cycle of indebtedness that could push national borrowing to 275 percent of economic output by 2060.

Jeroen Dijsselbloem, president of the Eurogroup of euro zone finance ministers, said on Tuesday that creditors would be prepared to ease further the terms of Greece’s debt repayments, but not imminently. The Eurogroup is due to discuss the issue at its next meeting on Feb. 20.

“At the end of the current (bailout) programme in mid-2018 we will look again to see what’s possible and what’s necessary. But not earlier,” Dijsselbloem told Dutch TV.

Germany has said the present programme, which started in mid-2015 and is worth up to 86 billion euros, could end if the IMF does not participate.

With no breakthrough in sight, the yield on two-year Greek government paper spiked to its highest level in more than seven months on Tuesday.

Breaking the impasse would ease Greece’s inclusion in the ECB’s bond-buying stimulus programme and the release of another tranche of funds from the bailout, and facilitate Greece making a major debt repayment this summer.

“A willingness by all parties to take initiatives to bridge differences, and the positive direction of the Greek economy, concur for a positive conclusion to this matter soon,” Greek government spokesman Dimitris Tzanakopoulos said.

Tzanakopoulos said Athens had “every reason to believe” the negotiations would be wrapped up soon given that Greece was meeting its commitments.

The Washington-based Fund has repeatedly expressed doubts that a primary surplus target of 3.5 percent over 10 years which the European Union and Greece initially signed up to can be achieved without Athens resorting to further austerity or in the absence of substantial debt relief.

Instead, it has suggested a less ambitious surplus target of 1.5 percent.

Greece, which has had testy relations with the IMF since its first bailout in 2010, has singled out the Fund for criticism over its austerity viewpoint, rather than EU partners resisting debt relief.

“The government’s position is clear and it has been expressed categorically ... our aim is to not yield to illogical demands by the International Monetary Fund, which insists on legislating precautionary (austerity) measures after the programme ends,” Tzanakopoulos said.

IMF debt would not be written off, meaning only Greece’s European lenders would be affected.

Writing by Michele Kambas; Editing by Catherine Evans