European governments late Monday gave Greece two extra years to wrestle down its budget deficit, pledging to plug the resulting financing gaps in order to keep the country in the euro and prevent a renewed flareup of the debt crisis.
Finance ministers granted Greece until 2016 to cut the deficit to 2 percent of gross domestic product while putting off until next week a decision on how to cover additional Greek funding needs of as much as 32.6 billion euros ($41 billion).
In the latest compromise in three years of crisis fighting, creditors led by Germany opted to keep money flowing to Greece instead of risking a default that could lead to a Greek exit from the euro and stir more turmoil for countries left in it.
Extending the deficit-reduction deadline “would be an appropriate adjustment for the further path of fiscal consolidation,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels Monday after chairing a meeting of euro finance chiefs. He said “a certain number of avenues” except the writedown of official loans are being looked at for filling the funding gap.
Left unanswered was how the creditor governments will ease Greece’s funding constraints without putting up more money themselves, a question that may dog German Chancellor Angela Merkel during her campaign for reelection in late 2013.
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