Greek talks not likely to close before summit

Tim Wallace
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NEGOTIATIONS in Greece could drag on into next month, top EU official Olli Rehn warned yesterday, dashing hopes that the government is close to receiving the next tranche of its bailout.

The troika of creditors – the European Central Bank, EU and International Monetary Fund – are demanding Greece makes more convincing spending cuts before they commit to handing out the €31.5bn (£25.4bn) the government needs to avoid going bust next month.
Finance minister Yannis Stournaras yesterday said “negotiations will continue until after the EU summit”, which takes place on Thursday and Friday, despite previously planning to complete the round of bargaining this week.

And European commissioner Rehn told the Wall Street Journal that the deal will only be complete in mid-November.

German Chancellor Angela Merkel also acknowledged the country may need more help to get its finances in line, yesterday insisting the government will not be allowed to default on its debts.

That brings her closer to the IMF’s position – the organisation has suggested that the terms of the bailout should be extended to give hard-pressed Greece more time to pay back the borrowed funds.

The country is about to go into its sixth consecutive year of recession, throwing initial plans well off track, necessitating even greater spending cuts to try to bring its finances under some kind of control.

Meanwhile the ECB’s Klaas Knot warned that government debts in the Eurozone will be dangerously high for decades to come.

Policymakers hope that jointly backed eurobonds could be issued when governments get their debts back down to more normal levels once again.

“Given how remote we still are from the 60 per cent debt target, this will likely be a matter of decades rather than years,” he said.