Greece and Creditors Fail to Make Progress on Bailout Deal

Eurozone finance ministers met in Brussels as a possibly troublesome election season looms in Europe

The Wall Street Journal

By VIKTORIA DENDRINOU and  NEKTARIA STAMOULI
Updated Jan. 26, 2017 4:00 p.m. ET


BRUSSELS—Greece and its creditors failed to resolve their differences Thursday during talks held in hopes of finding a solution for the country’s deadlocked bailout before Europe’s coming election season dominates the Continent’s agenda.

A meeting of eurozone finance ministers here didn’t reach a breakthrough that would clear the way for the conclusion of negotiations on the current review of Greece’s aid package of as much as €86 billion. But there is pressure to get a deal by February, because after that, a series of elections in the Netherlands, France, Germany and possibly Italy could distract attention and reduce governments’ interest in making any unpopular concessions on Greece.



“There is a clear understanding that a quick finalization of the second [bailout] review is in everyone’s interest,” said Jeroen Dijsselbloem, the Dutch finance minister who presided over the meeting of his eurozone counterparts.

Greece needs billions of fresh bailout loans by July at the latest, when it has large debts to repay. Its government has been caught for months between the International Monetary Fund’s demands for more austerity and Germany’s refusal to discuss major debt relief. Greece’s unpopular government, led by the left-wing Syriza party of Prime Minister Alexis Tsipras, fears having to sign up for fiscal pain without a significant reduction of its debt burden to sweeten the deal.

Athens wants the German-led eurozone, its main creditor, to restructure its bailout loans so the European Central Bank can include Greece in its bond-buying program, known as quantitative easing. Greece believes its long-suffering economy could benefit strongly. The ECB has indicated it won’t buy Greek bonds until doubts about Greece’s solvency have been dispelled.

First, however, Germany wants Athens to accept the IMF’s tough policy demands. The success of current negotiations “is solely up to Greece,” German Finance Minister Wolfgang Schäuble told reporters on his way into the ministers’ meeting.

The IMF didn’t sign up to Greece’s 2015 bailout deal. Germany, the Netherlands and other eurozone lenders want the IMF to rejoin the bailout.

The IMF says more fiscal belt-tightening is needed in Greece—particularly in the form of pension cuts and the expansion of income taxes to more households—if Greece is to hit fiscal targets that it agreed to with the eurozone in its 2015 bailout plan. The IMF says those targets are too strict, and more austerity is bad for Greece’s economy, but if Europe won’t relax the targets, then more budget retrenchment is unavoidable.

It says it will only join the bailout if Greece meets those overhauls and Europe agrees to restructure its loans.

Germany insists Greece must stick to the agreed target of a “primary” budget surplus, excluding interest, of 3.5% of gross domestic product by 2018, and maintain it for years afterward.

Mr. Tsipras is balking at the IMF’s demand that he pass the pension and tax measures into law right away, even if they take effect over several years. “There is no way we’re going to legislate even one euro more (of cuts) than what was agreed in the bailout deal,” Mr. Tsipras told Greek newspaper Efimerida ton Syntakton in an interview published on Wednesday.


Eurozone officials say Greece can’t avoid legislating some painful measures upfront, because key European creditors won’t lend Greece more money unless the IMF is satisfied and rejoins the bailout.

— Natalia Drozdiak contributed to this article.

Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com and Nektaria Stamouli at nektaria.stamouli@wsj.com