Eurozone partners at loggerheads on long-term debt solution for Greece

(AFP) Greece's creditors are seeking ways to ease the country's long-term debt burden and fill a hole of more than 30 billion euros without stepping in to offer a third bailout, with key elections looming in eurozone powerhouse Germany next year.

But eurozone partners, the International Monetary Fund (IMF) and the European Central Bank (ECB), are at loggerheads on how to do this.

Some of the ideas being discussed include:

Two-year delay in debts targets from 2020 to 2022

This is the approach Eurogroup chairman and Luxembourg premier Jean-Claude Juncker would like to see, but the IMF are dead against this. For the international lender of last resort, this would breach strict rules governing debt-to-output ratios (120 percent by 2020) which were agreed in March.

A debt write-down or "haircut"

The simplest way to give Greece access again to commercial market financing, but the hardest to sell where public opinion has regularly adopted a hardline attitude.

The IMF backs a partial write-down of so-called "official sector" debt, similar to the write-down agreed by private sector lenders earlier this year.

The aim would be to prevent the country's debt-to-output ratio ballooning to an estimated 190 percent of gross domestic product in 2014, against a target of 120 percent by 2020.

This, though, means crossing a red line for the ECB, as well as key eurozone states led by Germany, for whom fiscal transfers to other sovereign parts of the currency area are considered a vote-loser.

Debt buy-back

Greece could buy back some of its debt, taking advantage of its collapsed value. This would be a technical means of annulling monies owed, but would still require financing, say from eurozone rescue funding, during transfers.

A favoured option in Berlin, market analysts warn there are no guarantees that banks and insurers would be ready to sell.

Lowered interest rates

Reducing the cost of servicing Greek debt could see drops in the interest rates on loans old and new, which is the preferred route for the representatives of private sector financiers who negotiated the bank haircut.

The difficulty here is political, a European Union diplomat says, with a need to extend the same favourable treatment to Ireland and Portugal, which have also benefited from bailouts during the three-year debt crisis.

The savings would be limited, according to Klaus Regling, who heads existing eurozone rescue funds, given current interest rates of between 1.5 and two percent.

Longer repayment times or temporary freezes are also alternatives in this area.

Foregoing profits

The ECB has acquired Greek debt at advantageous prices given the collapse in its value on private markets since the crisis first erupted. It is strongly discinclined to give up these profits, fearing such a move is the equivalent of monetary financing for a state which is a party to the currency it manages.

These profits, though, are re-distributed around national-level central banks, and some think they could then be re-routed to Greece, enabling the ECB itself to say it stuck to treaty restrictions. This would be done by states deciding to forego their share of these profits.