Europe could cut interest rates on Greek loans

European governments are considering cutting interest rates on emergency loans to Greece and using contributions from the European Central Bank to plug a new financing gap in the second bailout programme for Athens, two people familiar with the discussions said.

Finance ministers wrangled over how to close the funding hole in a teleconference last night after seeing estimates that Greece’s debt would fall to 129% of gross domestic product in 2020, missing a target of 120%, said the people, who declined to be named because the talks are still in progress. Last year, the level was about 160%.

With the new obstacle in talks over the full programme, the ministers’ next meeting on Feb 20 may be limited to kicking off a bond exchange with private investors that is critical to staving off a Greek default in March, the people said.