Current plans to save Greece from financial collapse would still leave the country with debt far above the maximum level set by its international creditors, a European diplomat said Thursday.
When they tentatively agreed on more help for Greece in October, the leaders of the 17 euro countries said the country's debt load had come down to 120 percent of its economic output by 2020 _ the maximum they said was manageable without external support. The new level is now expected to be closer to 129 per cent, the diplomat said.
The fact that even substantial new help, both from the eurozone and private bondholders, cannot sufficiently decrease Greece's debt load is one of the main reasons doubts over a second, euro130 billion ($170 billion) bailout for Athens have emerged.
The diplomat was citing figures from a new report by Greece's international debt inspectors _ the European Commission, the International Monetary Fund and the European Central Bank.
The report analyses Greece's growth prospects over the coming years as well as the impact of new austerity measures promised by Athens, a euro100 billion ($130.92 billion) debt relief Greece has negotiated with private bondholders and the new bailout.
The diplomat was speaking on condition of anonymity because the report is confidential. He couldn't say into how much money would be necessary to close the gap between the 129 percent and the 120 percent target. At the moment Greece's debt is just above 160 percent of economic output and, without the debt relief, it would rise to around 200 percent by the end of this year.
The fact that there is a financing gap in the new aid program has been known for some time and is one of the main reasons the debate over the new bailout has heated up in recent days. Politicians _ particularly those from rich countries like Germany, the Netherlands and Finland _ have cited the so-called debt sustainability analysis for Greece as one of the main elements in their decision over whether to send more money to Athens.
Officials from the eurozone countries, the Commission and the IMF have been discussing for weeks how to close the gap to the 120 percent goal.
The biggest hopes have been laid on the ECB, which holds some euro50 billion ($65 billion) to euro55 billion ($72 billion) in Greek government bonds. Since the central bank bought these bonds at a discount _ analysts estimate the ECB spent around euro40 billion ($52.37 billion) _ it stands to make a hefty profit if they get repaid in full.
For the past few weeks, ECB officials have hinted that the bank could redistribute these profits to the eurozone countries that are its shareholders, which could then use those funds to further support Greece. However, no final decision has been announced so far.
Another way to help close the gap would be to further lower the interest rates on the bailout loans Greece has been receiving since May 2010.
The diplomat said another option had been discussed by finance ministers during their conference call Wednesday night: helping Greece with an upcoming euro5.5 billion interest payment to bondholders. But he said no decision had been taken on that proposal.
In recent days, concern has crept back into the markets that Greece could still be forced into a disorderly default on a vital euro14.5 billion ($19 billion) bond repayment due next month.
In addition to the financing gap revealed in the new report, politicians in several countries have questioned the commitments of the leaders of Greece's main political parties to implement promised reforms and cuts even after elections expected in April.
Lackluster implementation would further increase the financing gap in the bailout program and leave Greece even further away from a manageable debt load.
"We can help (Greece), but we can't pour (money) into a bottomless pit," Germany's Finance Minister Wolfgang Schaeuble told German Suedwestrundfunk radio Wednesday.
Pan Pylas in London contributed to this story.