THE EU and the International Monetary Fund are working on a compromise to break the deadlock on Greece's debt mountain which has held up the latest rescue loans, a Greek finance ministry source says.
The European Union and IMF, which are fronting Greece's multimillion-euro loan rescue, are 10 billion euros ($A12.5 billion) away from a solution that will satisfy debt management requirements on all sides, the ministry source told AFP.
The IMF has insisted for months that Greece must bring its runaway debt to 120 per cent of output by 2020.
Under the compromise now in the works, the IMF could accept a revised debt target of 124 per cent, the ministry source said.
The International Monetary Fund works to its own internal principles that it should not lend to a country if debt in the medium-term looks unsustainable. The IMF's cut-off point is medium-term debt of 120 per cent of annual output.
But with Greece's economy rapidly contracting owing to the deepening recession that has gripped the country for the past five years, this target has become progressively unrealistic.
In absolute terms, the Greek debt still exceeds 300 billion euros, a sum that will represent about 190 per cent of the country's output in 2014.
The EU-IMF disagreement over Greece's debt sustainability has held up the disbursement of loans from the country's 130-billion-euro financial rescue agreed in February.
Athens has been waiting since June for an instalment of 31.2 billion euros ($A39.03 billion) that was held up owing to reform delays and a protracted electoral campaign.
By the end of 2012, it is also due to receive two more payments, worth five billion and 8.3 billion euros.
In return, it has pledged to implement a series of draconian and unpopular austerity budget measures.
Marathon talks on unblocking the loans collapsed in Brussels this week.
But officials have voiced confidence that a deal will be reached Monday, at the next emergency meeting of the Eurogroup of finance ministers from the 17 states that use the single currency.
"We are working hard on the issue," said Germany's deputy government spokesman Georg Streiter, adding that there was "relative optimism" regarding the upcoming meeting.
"The issues are complex...but there is the desire to find a solution ... though there is still a little work to be done," added German finance ministry spokesman Martin Kotthaus.
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