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Greece given more time but no immediate funds

THE eurozone will not authorise more money for Greece despite the country approving a tough 2013 budget, because there is still no agreement on how to make its debts sustainable.

Jean-Claude JUNCKER: Impressed by Greece's recent performance.
Jean-Claude JUNCKER: Impressed by Greece's recent performance.

Finance ministers meeting in Brussels were, however, expected to give Athens two more years to meet its goals in talks about unfreezing lending to Greece.

Loans have been held up after Athens went off-track with promised reforms and budget cuts, largely as a result of holding two elections in the space of three months.

The Greek Parliament passed an austerity budget for 2013 on Sunday and a structural reform package last Wednesday, meeting the conditions for the release of the next tranche of €31.5 billion (£25bn) of emergency loans from the eurozone. However, a variety of officials have said the money will not be released yet.

"I am impressed by Greece's recent performance – Greece is on track to meet its commitments step by step," the chairman of eurozone finance ministers, Jean-Claude Juncker, said on arrival for the meeting. "There won't be any definitive decisions today, but I think the general feeling is we would like the next disbursement to done in the most efficient way possible."

The ministers will examine the commitments Greece has made on overhauling structural problems in its economy and assess whether its programme is getting back on track.

Mr Juncker said a report by the European Union and the International Monetary Fund (IMF) into the Greek economy, known as the troika report, had been submitted overnight, but officials said a critical element of it – an evaluation of Greece's debt position – was not yet ready.

The debt analysis looks at how to reduce Greece's debts from a forecast 190% next year to around 120% by 2020 – a level the IMF has deemed sustainable in the long-run. It remains unclear when the analysis will be finalised.

International lenders cannot yet agree on a single estimate for Greek debt in 2020 or on the best way to reduce it. Estimates between the institutions on the debt in 2020 differ by 10 and 20 percentage points, officials say.

Once there is an agreement, it will be sent to national parliaments to get approval for the disbursement of the next tranche.

"I think it's rather unrealistic to expect a final decision today as in Germany the Bundestag [lower house of parliament] has to agree to it in advance," German government spokeswoman Marianne Kothe said.

One thing the lenders do agree on now is that Greece, which will see its sixth year of deep recession in 2013, needs at least two more years to reach a primary budget surplus that would put its debt on a downward path. The extra time would allow the economy to start growing again, otherwise it would never produce enough for the country to repay its debt.

This surplus target was set in March at 4.5% of general domestic product in 2014 and while there is no final decision yet, officials say it is likely to be moved to 2016 because of delays with reforms and a deeper-than-expected recession.

The extra time would mean the eurozone would have to provide extra financing for Greece, which officials have put at €30bn. This is politically difficult in Germany, the Netherlands and Finland where public opinion is weary of bailouts.

Time pressure for a deal is growing because Athens has to redeem €5bn worth of treasury bills on November 16 and has been counting on cash from the next eurozone aid tranche to help cover that.

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