Greece's creditors hope EU will buy out IMF loans

Talks under way to end stalemate between Germany and IMF over Greek debt relief

WASHINGTON • International creditors for Greece are in talks to reduce their exposure to the cash-strapped country and are eyeing a European Union buyout of up to €14 billion (S$22 billion) in International Monetary Fund (IMF) bailout loans, the Financial Times reported.

The talks, held on the sidelines of the G7 finance ministers' meeting in Japan, are aimed at reaching a compromise on the prolonged stalemate between Germany and the IMF over Greece's debt relief.

The rough agreement discussed would also front-load some concessions to Athens before 2018, the paper reported on Friday.

Other debt relief measures such as payment or financing targets were also discussed - although these more divisive options would still be subject to decisions in 2018 and beyond, when Greece's latest bailout expires, the paper said.

Germany's opposition to the IMF demands for upfront debt relief has delayed billions of dollars in loans, which Greece needs by July at the latest.

Euro zone ministers have pressed to delay decisions on debt relief until 2018, enacting it only if necessary, Reuters reported. But the IMF insists that Greece's debt repayments are unsustainable and need restructuring now.

Euro zone finance ministers are due to meet on Tuesday to try to clinch a deal with Greece on a package of contingency steps to ensure Athens will meet future fiscal targets as well as reach a political agreement on future debt relief for Greece.

European officials have sounded an optimistic note ahead of those meetings. Eurogroup head Jeroen Dijsselbloem told Bloomberg in an interview from the G7 summit that he was confident a deal on the Greek aid programme could be reached on Tuesday.

European Economic Affairs Commissioner Pierre Moscovici on Friday also said negotiators were "very close" to reaching a deal on Greece.

On Thursday, the IMF said Greece would need a lengthy period free from debt payments to stay afloat if the EU does not agree to cutting the debt up front.

Some of the short-term relief options before 2018 that were floated include giving Athens €1.9 billion of profits from Greek bonds held by the ECB and using €19.6 billion from the euro zone's bailout fund to buy out old loans to Greece, the Financial Times said.

Greece's creditors are trying to avoid a repeat of last year's negotiations that nearly pushed the country out of the 19-nation common currency. The two sides are running out of time to release fresh aid before Greek bonds held by the European Central Bank come due in July.

A version of this article appeared in the print edition of The Sunday Times on May 22, 2016, with the headline 'Greece's creditors hope EU will buy out IMF loans'. Print Edition | Subscribe