November 13, 2012

Greece Gets Two More Years to Hit Deficit Targets

Extra funding to bridge additional time yet to be decided

Eurozone finance ministers have finally agreed to allow Greece an additional two years to meet its budgetary targets, although they have left undecided for now the matter of where additional funding will come from to tide the Mediterranean nation over during the extra period of time.

Bloomberg reported Tuesday that in the wake of Greece’s adoption of a stringent austerity budget for 2013, which spurred street demonstrations, the country’s creditors decided that it would be better to give Athens more time to cut its debt than to risk a default that could put everything in jeopardy.

Not everyone was happy with the decision, however. International Monetary Fund Director Christine Lagarde protested the extension of the deadline for Greece to cut its debt to a “sustainable” level to 2022, saying that the target date “has to be 2020.”

Lagarde and Eurogroup chairman Jean-Claude Juncker argued over the question of whether governments within the eurozone must write off some of their Greek debt so that the country can cut its obligations to a manageable level–a measure that Germany has unequivocally characterized as illegal.

Reuters reported that Lagarde took the unusual step of making public her disagreement late on Monday after the meeting, saying, "We clearly have different views. What matters at the end of the day is the sustainability of Greek debt so that country can be back on its feet."

Juncker scheduled another Eurogroup meeting for Nov. 20 and said that the following week might also be required to put together an agreement concerning Greece’s timetable.

In the meantime, French Finance Minister Pierre Moscovici said in the report Tuesday that Greece should receive the next tranche of bailout funds by the end of November. "Our objective is to reach an agreement in principle on November 20 so that we can ... proceed to the disbursement of funds by the end of this month," he was quoted saying. Greece is sweating out a Friday deadline for a 5 billion euro ($6.352 billion) bond repayment, but EU officials voiced conviction that there would be no default.

Rabobank rate strategist Lyn Graham-Taylor said in the report, "There seems to be quite a big difference of opinion between the IMF and eurozone finance ministers ... but our view is still that Greece won't leave the euro zone."

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