BRUSSELS: European leaders insisted yesterday that their imminent third attempt in as many weeks to unblock bailout funds for debt-stricken Greece will likely succeed, as Athens warned that the stability of the entire euro zone depends on it.
The euro zone is a "whisker" away from a deal to unblock the money aimed at keeping Greece from going bankrupt, French Finance Minister Pierre Moscovici said just hours after marathon talks on the aid package collapsed in Brussels.
"We are very close to a deal," he said, noting that the next emergency meeting of the Eurogroup of finance ministers from the 17 states that use the single currency would be held on Monday.
Recession-battered Greece has been waiting since June for an installment of 31.2 billion euros ($40 billion) in aid, part of a 130-billion-euro financial assistance package initially granted early this year which is tied to harsh new austerity measures.
The failed bid to reach a Greek deal came a day before the European Union was headed for fresh trouble at a summit called to try and agree a hotly-contested trillion-euro budget.
German Chancellor Angela Merkel said there was "a chance there will be a solution on Monday" on Greece.
But she warned there would not be "one action, one solution in one fell swoop, one truth" to resolve the three-year crisis that has brought the euro zone to the brink of collapse.
Both Moscovici and Greek Prime Minister Antonis Samaras underlined the high stakes involved, warning that the euro zone would be threatened if no deal was reached.
"It's not only the future of our country but the stability of the entire euro zone which depends on the success of the conclusion of this effort in the next few days," Samaras said in a statement.
A source close to the failed overnight talks — also attended by International Monetary Fund chief Christine Lagarde and European Central Bank president Mario Draghi — said it was far from certain that a deal would be clinched on Monday.
"We are really not close to an agreement," the source told AFP, noting that the negotiations were bogged down by the issue of how to ensure that Greek debt is sustainable in the medium term.
Eurogroup President Jean-Claude Juncker wants an extra two years — until 2022 — to be granted to Greece to arrive at a point where it can raise its own funds on the markets.
But the IMF, which along with the ECB and the EU forms the "troika" funding the Greek bailout, is insisting on 2020 as the year when the ratio of Greek debt to output be reduced to the 120 percent of GDP mark seen as sustainable.
If that target cannot be achieved, the IMF might have to withdraw from efforts to stabilize the Greek economy as its statutes ban it from lending to a country which cannot reasonably be expected to repay its debt in the medium-term.
The IMF is thus "refusing to sign an agreement which it considers to be unrealistic," said the source who argues that a Greek deal is far from imminent.
Greece's debt burden is currently nearly 180 percent of GDP and expected to rise to 190 percent by 2014. That is about three times the EU's 60-percent limit and way beyond what the country can support, meaning it must be reduced one way or another.
The source said that the overnight talks had investigated a "patchwork of measures" to deal with Greek debt.
One route was to reduce the interest rate on loans to Greece by the euro zone and to extend the repayment period.
Several more technical arrangements had also been discussed, the source said.
"But to achieve the intended outcome, several small measures must be put together, and each of these runs into objections of various types," the source said.
Objections arose mainly from so-called "hawks" in northern Europe, the source said, pointing to Germany, the Netherlands and Finland.
By the end of 2012, Athens is also due to receive two more aid payments, worth 5.0 and 8.3 billion euros. In return, it has pledged to implement a series of unpopular austerity budget measures.