The deadline to dispense further rescue loans to debt-stricken Greece was extended by eurozone countries once again on Sunday amid continuing deadlock between Athens and its creditors.
With negotiations still bogged down over failure to agree on a new foreclosure law – legislation the leftist-led government says would push austerity-hit Greeks over the edge – lenders postponed a critical Eurogroup Working Group until Tuesday.
The meeting, a final assessment of the reform progress Athens has made since it signed up to a third bailout in July, is crucial to unlocking €2bn (£1.41bn) in rescue loans and €10bn for the recapitalisation of Greek banks.
But announcing the delay, Jeroen Dijsselbloem who chairs the Eurogroup of euro area finance ministers, also heaped praise on Greece saying headway had been made.
“I welcome that good progress has been made between the Greek authorities and the institutions in the discussions on the measures included in the first set of milestones,” the Dutch politician said in a statement on Sunday. “Agreement has been reached on many issues.”
The Eurogroup Working Group sets the tone for decisions taken by finance ministers representing EU member states in the single currency.
Talks were meant to have been completed by mid-October but have repeatedly stalled on the issue of how much protection local home-owners should be given in the event of defaulting on mortgages. Greek banks have been weighed down by a mountain of bad loans with lenders claiming that many are the result of strategic defaulters deliberately failing to keep up with payments.
Prime minister Alexis Tsipras’ government – backed by the political opposition – insist the law would hit the most vulnerable, dispossessing thousands of primary residences at a time of acute social hardship.
The two sides failed to bridge their differences during marathon, 14-hour negotiations that lasted until 2am Sunday morning. Both sides described the 48-hour delay as “a window of opportunity” to finally settle the issue.
Policymakers have voiced fears that the constant delays are chipping away at Greece’s financial sustainability, with fiscal targets becoming ever more elusive.
Athens’ Syriza-dominated government is keen to use the €2bn loan to implement relief measures alongside painful spending cuts set as the price of receiving a third financial rescue package in five years.
Recapitalisation of Greek banks is seen as a vital next step if the cash-starved economy, wracked by six years of recession, is to stay afloat.
Both the EU and IMF have said they will only begin debt relief talks once the negotiations are completed and Greece is given a good progress report. With debt amounting to 180% of GDP, a write-down is an important step towards long-term economic recovery.