EU, IMF working on Greek debt compromise

ATHENS: The EU and the International Monetary Fund are working on a compromise to break deadlock on Greece's debt mountain which has held up the latest rescue loans, a Greek finance ministry source said on Friday.

The European Union and IMF, which are fronting Greece's multi-million loan rescue, are 10 billion euros ($12.7 billion) away from a solution that will satisfy debt management requirements on all sides, the ministry source told AFP.

The IMF has insisted for months that Greece must bring its runaway debt to 120 percent of output by 2020.

Under the compromise now in the works, the IMF could accept a revised debt target of 124 percent, the ministry source said.

The International Monetary Fund works to its own internal principles that it should not lend to a country if debt in the medium-term looks unsustainable. The IMF's cut-off point is medium-term debt of 120 percent of annual output.

But with Greece's economy rapidly contracting owing to the deepening recession that has gripped the country for the past five years, this target has become progressively unrealistic.

In absolute terms, the Greek debt still exceeds 300 billion euros, a sum that will represent around 190 percent of the country's output in 2014.

The EU-IMF disagreement over Greece's debt sustainability has held up the disbursement of loans from the country's 130-billion-euro financial rescue agreed in February.

Athens has been waiting since June for an instalment of 31.2 billion euros ($40 billion) that was held up owing to reform delays and a protracted electoral campaign.

By the end of 2012, it is also due to receive two more payments, worth 5.0 and 8.3 billion euros. In return, it has pledged to implement a series of draconian and unpopular austerity budget measures.

Marathon talks on unblocking the loans collapsed in Brussels this week.

But officials have voiced confidence that a deal will be reached Monday, at the next emergency meeting of the Eurogroup of finance ministers from the 17 states that use the single currency.