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Eurogroup To Meet On Greece Amid Clash With IMF Over New Funding Needs

November 19, 2012 RTTnews
Eurozone finance ministers are heading for another round of talks on Greece in Brussels on Tuesday, seeking to thrash out a plan to bridge a financing gap created by a two-year extension of Greece's bailout program, while settling a dispute with the International Monetary Fund on the same.

The finance ministers of the 17 euro area nations, known as the Eurogroup, will also discuss how to restore Greek debt sustainability by 2020, as this is crucial in restoring investor's faith in the single currency.

Last week, Eurogroup granted Greece two extra years to meet its budget targets, which would leave a funding hole of around EUR 32.6 billion through 2016. They had also delayed a decision on whether to release the latest EUR 31.5 billion tranche of bailout funds.

However, the IMF had expressed its discontent over the decision to grant two more extra years for implementing the austerity measures. IMF Chief Christine Lagarde has said that the appropriate timetable to reduce Greece debt to 120 percent is by 2020.

According to the initial accord, the country had to achieve a primary surplus of 4.5 percent of GDP in 2014, which has now been extended to 2016.

Eurogroup Chief Jean-Claude Juncker, however, has conveyed that more negotiations will be held on this issue before nailing down a final deal. The earlier meeting had called on the Greek authorities to implement the few remaining prior actions as a matter of urgency so as to allow for a swift conclusion of the review.

Greek Prime Minister Antonis Samaras has already said that his government will run out of money by mid-November if it fails to secure the loan installment.

Notably, the Greek Parliament passed a crucial austerity bill containing EUR 13.5 billion worth of cost-cutting measures on November 7 and an austerity budget for 2013 on November 11.

The Eurogroup meeting will be followed by an EU meeting on November 22 and 23 to hash out the issues surrounding the region's long-term budget.

Meanwhile, the Financial Times reported Sunday that the EU officials have started work on the budget without the U.K., which has serious disagreements over the planned spending measures.

UK has been demanding a spending freeze, a proposal which most of the EU members do not approve of. They argue that a freeze on spending could harm the bloc's growth prospects and hamper its ability to emerge from the crisis.

Though many European countries have reservations against the spending proposals and want some cut in the planned expenditure, the tough stance taken by the U.K. has become a headache for EU officials as they see little room for a compromise with British Prime Minister David Cameron, who is poised to gain big political mileage at home if he vetoes the EU budget.