Greece may get more time to reach financial targets under its 130 billion euro rescue package but probably not more money, its international lenders signalled on Friday, saying a decision had to come by the end of October.
Greek Prime Minister Antonis Samaras, leading a country in its fifth year of recession at a time of rising discontent at home, wants two more years to implement economic reforms tied to the bailout to soften their impact.
International Monetary Fund Managing Director Christine Lagarde said lenders may now agree to some sort of extension.
"There are various ways to adjust: time is one and that needs to be considered as an option," Lagarde told a news conference following a meeting of euro zone finance ministers in Cyprus.
Greece's second bailout envisages Athens returning to international markets by 2015, but with two consecutive parliamentary elections in May and June after political parties struggled to form a coalition, the country has lost ground on its reform agenda. Deepening recession has also made the debt targets less attainable.
Although the extent of the shortfall will not be known until a report by lenders in October, Greece is unlikely to win back investor confidence quickly and meet its targets, which include a primary surplus of 4.5 percent of economic output in 2014.
EU officials have told Reuters that Athens is way behind on its debt-cutting programme, suggesting Greece will need funding support past 2014 until it can return to market. But at the Cyprus meeting, there was no talk of a third bailout.
"There will probably be no more money (for Greece)," Austrian Finance Minister Maria Fekter told reporters.
It was not immediately clear how ministers will reconcile the issue, but, having made strenuous efforts to shore up Spain and Italy, it would make no sense to tip Greece into default now and plunge the currency bloc back into chaos.
Athens, where Europe's debt crisis began nearly three years ago, has been boosted by a decision to give bailed-out Portugal more time to meet its fiscal targets as economic recession saps Lisbon's ability to deliver.
Under the revised targets, Portugal has until 2014 to bring its budget deficit down to the EU limit of 3 percent, ministers said in a statement on Friday. Previously, the 78 billion euro bailout required a deficit of 3 percent in 2013.
Jean-Claude Juncker, who chairs the meeting of euro zone finance ministers, said the EU and IMF must take a decision by the end of October on how to revise the Greek programme and said there was no question of Greece leaving the euro zone.
Ministers will meet again in Luxembourg on October 8 to discuss Greece's finances on the basis of the report expected to be finished by the EU, the IMF and the European Central Bank, while Europe's leaders meet for a summit in Brussels on October 18.
"I don't have the intent to wait until November," Juncker said.
Greek Finance Minister Yannis Stounaras said: "There is progress in discussions with the troika, we will try to finalise (that) as soon as possible, to be ready for final decisions at the latest by end of October."
(Additional reporting by Michele Kambas, editing by Mike Peacock)