The eurozone is likely to decide on a third bailout for Greece in November, after international inspectors finish an assessment of Greece's struggles to carry out painful reforms, officials said on Thursday.
The International Monetary Fund and Greece estimate that Athens will need 10 billion euros-11 billion euros ($13.12 billion - $14.43 billion) in new financing in 2014- 2015 above what the eurozone and the International Monetary Fund have agreed to so far.
This is partly because eurozone central banks refused to delay repayment of Greek government bonds, contrary to an assumption by eurozone finance ministers, the Eurogroup, when they set up the current bailout.
Greece is still deep in its worst post-war slump, and the sale of state assets is well behind plan.
Greece has already had two international bailouts since 2010, and more money for it is controversial in Germany which has elections on Sept. 22. Voters there are tired of helping others after three years of the sovereign debt crisis.
Greece will not need any additional funds until the second half of 2014, but a decision must be taken in November at the latest because the IMF can only participate in the Greek bailout if the program is fully funded 12 months ahead.
"As far as the potential need for a third program for Greece is concerned, it's clear that despite recent progress, Greece's troubles will not have been completely resolved by 2014," Eurogroup President Jeroen Dijsselbloem told the European Parliament on Thursday.
"It is realistic to assume that additional support will be needed beyond the program. In this context, the Eurogroup has indicated clearly that it is committed to providing adequate support to Greece during the current program and beyond until it has regained market access," he said.
Dijsselbloem also said Ireland would receive eurozone help to get out of its bailout program at the end of this year, news that may displease some voters in Germany
The next review of the reforms that Greece has committed to in exchange for the 172 billion euro financial lifeline last year, will start in late September and take several weeks to complete. It is written by inspectors from the IMF, the European Central Bank and the European Commission - called the troika.
"Once this is completed, we will have an overview ... of the financing of the current program and we will have this on our agenda the next month and finalize the process in November," Dijsselbloem said.
He declined to confirm that the missing funding for Greece would be in the form of new loans, but the eurozone seems to have little choice.
A senior EU official said that other options included an early return to markets by Greece with a short-term bond and re-assigning unused bailout funds earmarked for the recapitalization of the Greek banking sector.
Yet the IMF believes the eurozone will have to go even further than new financing, by providing some form of debt relief to Greece, whose ratio of debt to economic output is to peak at 175-176 percent this year.
In July, the IMF estimated that Athens will also need a debt reduction of some 4 percent of gross domestic product in 2014-2015 if the country is to meet its goal of cutting the debt pile to 124 percent in 2020 and well below 110 percent in 2022.
Eurozone finance ministers are ready to discuss some help on debt for Greece after April 2014, when the EU publishes official debt and deficit data for 2013, providing Greece meets all its reform targets.
The ministers agreed last December however, that such relief would be limited to cutting the interest on the 53 billion euros of bilateral loans extended under the first bailout as well as further reducing the amounts that Greece has to contribute to European Union-funded projects in the country.
But the interest reduction on the bilateral loans would yield only very small amounts.
"Greece pays interest of 3-month EURIBOR of 0.22-0.23 percent, plus a 0.5 point margin. If you take that margin away, that's how much Greece can get - that's 265 million euros," one eurozone official involved in the discussions said.
Greek debt now stands at around 305 billion euros, or 160 percent of GDP. Most of that Athens owes to the eurozone. Yet the eurozone is not prepared simply to forgive Greece some of the debt.
"There will be no haircut to the nominal value of the loans, it will not happen," a second eurozone official involved in the Greek talks said.
"I cannot see it happening, it is politically impossible to imagine. If loans were to be turned into grants, it would so fundamentally change the nature of the Greek support program, that I do not see any readiness to do that," the official said.
The official added that if Greece were forgiven debt, other eurozone countries like Ireland, Portugal or Spain which received eurozone support could demand the same.
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