Greece expects decision on 2014 funding gap in December

By Lefteris Papadimas

ATHENS | Wed Oct 16, 2013 5:01pm BST

(Reuters) - Greece expects its foreign lenders to agree in December on how to plug a funding gap the country faces next year, its finance minister said on Wednesday, while a decision on how to cut its debt will come several months later.

Twice-bailed out Greece first sought a financial rescue from the European Union and International Monetary Fund in 2010 and has since been kept afloat with over 200 billion euros in aid.

The latest bailout programme was designed to see it through 2014 but a funding shortfall has emerged for the second half of the year which the EU Commission puts at 3.8 billion euros and the IMF at 4.4 billion euros.

Financial inspectors from Greece's troika of EU and IMF lenders are due back in Athens early next week.

The European Central Bank this week rejected a Greek plan to help cover the gap by rolling over government bonds, saying this would go against a ban on financing governments.

However, a finance ministry official said on Wednesday that proposal was still on the table.

Other possible alternatives for covering a funding shortfall Athens and the IMF say will reach nearly 11 billion euros over 2014-15 include a third bailout.

"We have discussed all the options and decisions will be taken in December," Finance Minister Yannis Stournaras said after talks with Thomas Wieser, the head of the Eurogroup working group that prepares decisions at meetings of the euro zone's finance ministers.

The ministry official said a decision on how to reduce Greece's debt would come in April, assuming data confirms Athens has reached its target of posting a primary surplus in 2013.

A fiscal surplus excluding debt servicing costs would make Greece eligible for further debt relief from its lenders.

Greece's debt is set to top 175 percent of its GDP this year and economists say further relief is needed if the country is to make its debt sustainable over the long term.

Greece faces a potential fiscal gap next year that - notwithstanding repeated denials from Stournaras - local media have speculated may entail additional austerity measures worth 2 billion euros.

The lenders have previously said Greece's fiscal outlook for 2013-14 is subject to high uncertainty, noting that tax collection was concentrated in the second half of the year.

"The issue of the fiscal gap will be examined extensively with the troika in the coming days and we hope to reach a solution," a second finance ministry official said.

Greece, which has imposed painful austerity pensions over the last three years, has ruled out further measures. "There is no room for new, across-the-board fiscal measures," the government's spokesman, Simos Kedikoglou, told Greek TV.

"Since we are fulfilling our commitments we expect our partners do the same."

(Additional reporting by Angeliki Koutantou; Writing by Karolina Tagaris; Editing by John Stonestreet)