European Union seeks to calm budget row with Greece

Attica: Austerity-wracked Greece could strike a deal with its creditors by early next year, a senior EU official said Sunday, seeking to calm a recent row over surprise handouts announced by Athens.

European Commission vice-president Valdis Dombrovskis made the comments days after the EU suspended debt relief for bailed-out Greece after its maverick premier Alexis Tsipras hiked spending for pensioners, angering austerity champion Germany

"We think that with a constructive attitude on all sides, a technical level agreement will be found in the next few months," he told the Greek daily Kathimerini in an interview.

In that perspective a second examination of Greece`s budget plan "will be concluded by the start of 2017," he added.

Tsipras sparked a new row with its European creditors last week after announcing handouts including a surprise one-off payout to 1.6 million low-income pensioners and a sales tax break for islands sheltering thousands of migrants.

On Wednesday EU finance ministers suspended debt relief for Athens, in a new setback in the Greek debt crisis as the eurozone and the International Monetary Fund battle over how far to push Athens on implementing more tough policy reforms. 

But the standoff revealed divisions at the heart of the eurozone, with French President Francois Hollande defending Athens and saying it should be "treated with dignity" and not forced to make even more of an effort.

The handouts announced by Tsipras should not significantly change Greece`s budget forecasts for 2017 or 2018, Athens` European creditor institutions said Thursday.

"We are not in an impasse," Dombrovskis told the Greek daily, while insisting that "the unilateral announcement by the Greek government of these benefits... complicated the situation".

"The measures trigger concerns by the (creditor) institutions in terms of the targets which Greece must meet according to its commitments," he said, while acknowledging that Athens had respected the required aims, namely a budget deficit of 0.5 percent this year and 1.75 percent in 2017.