IMF says Greek loan talks stuck

2 Nov 2012, 9:56 am   -   Source: AAP
Talks to save the Greek economy have stalled as the country edges closer to bankruptcy. (AAP)

Talks to save the Greek economy have stalled as the country edges closer to bankruptcy. (AAP)

The International Monetary Fund says Greece's negotiations with international lenders for desperately needed rescue funds are stuck.

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Greece's negotiations with international lenders for desperately needed rescue funds are stuck some two weeks before bankruptcy looms, the IMF says.

The International Monetary Fund said on Thursday the talks were stalled over the conditions for financing Greece as it seeks a two-year extension to meet fiscal goals.

While Athens has made "good progress" on fiscal and structural reforms, IMF spokesman Gerry Rice said in Washington, "an understanding must also be reached between Greece and its creditors on financing terms consistent with debt sustainability".

That news triggered a five per cent drop in Athens' main ATHEX stock index, which tumbled below the 800 point level to close at 761.24 points.

Shares in banks, which are awaiting some of the rescue money to shore up their capital, were the worst hit, with the banking stocks sub-index down by 11.7 per cent.

Greece, the IMF, the European Union and the European Central Bank, known as the troika, have been locked in discussions for weeks on revising terms for the country's bailout after it fell short of targets which needed to be met for the release of the next instalment of funds from the three lenders.

Athens has asked for the fiscal targets to be pushed back another two years, to give it more room to rekindle economic growth after a crushing austerity program sent it into a deeper recession than the lenders had expected.

Greek Prime Minister Antonis Samaras has said the coffers in Athens will run dry on November 16 - when a three-month treasury bill worth five billion euros ($A6.3 billion) must be repaid - unless his country receives the next 31.2 billion euros in rescue funding.

Samaras had announced on Tuesday that his government had agreed with the mission of troika auditors in Greece on the terms of a new 13.5 billion euro austerity package needed to unlock the next instalment of rescue loans.

Accordingly, the finance ministry on Wednesday introduced a budget and a three-year economic program pledging the required level of cuts in 2013-14.

But on the same day the European Commission warned that a debt deal with Athens was still pending. Eurozone finance ministers are due to make a final decision on the payout by November 12.

Finance Minister Wolfgang Schaeuble of Germany, Europe's paymaster, noted that considerable progress had been made in the talks with Greece "but there is still a lot of work to do".

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