Greece may get extra time to meet austerity targets

Greece is likely to be granted more time - but not more money - to meet the austerity measures set by its euros 130 bn (pounds 105 bn) bail-out package, leaders have signalled.

Greece's Yannis Stournaras said after a meeting of European finance ministers in Cyprus that the issue of breathing space for his country to meet its budget targets was "on the table".

Christine Lagarde, director of the International Monetary Fund (IMF), added: "There are various ways to adjust: time is one and that needs to be considered as an option." However, leaders put off making a firm decision until late October. Sources said they wanted to see if the European Central Bank's radical bond buying programme, the Outright Monetary Transactions (OMT), would have an impact on Greece's stricken finances.

Jean-Claude Juncker, head of the eurogroup of 17 finance ministers, said: "I don't have the intention to wait until November [to make a firm plan on Greece]. But from a realistic point of view, it will not be possible to take a decision until the first half of October."

The question of a bail-out of Spain, which has loomed for weeks, was also delayed. Before the meeting, Ireland's finance minister Michael Noonan called on Spain to "set out their position" on ECB aid.

Spain's finance minister Luis de Guindos insisted the discussion would be on ECB action in general, not Spain.

However, he said Spain had agreed to present a fresh list of reforms to Brussels by the end of the month in a move that was seen as a bid to persuade Europe that Madrid can cope without help.

"We will adopt a new set of reforms to boost growth," said Mr de Guindos. "It will be in line with the recommendations of the European Commission". The Bank of Spain said Spanish public debt rose to 75.9pc of GDP in the second quarter, up from 72.9pc in the three months before.

Meanwhile, Mario Draghi, the ECB president, offered to face critics in the German Bundestag to explain the decision to launch OMTs.

"I need to do more to explain our measures," he told a German newspaper. Appearing before parliament "would be a good opportunity to explain what we're doing". Mr Draghi said later that he had seen the "first signs of more normal working [in the markets] but we still have a long way to go." However, Gordon Brown, the former British prime minister, disagreed. In an article for the Reuters news agency, Mr Brown said the ECB action was a case of "so far so good - but it is not far enough".

He added: "The net effect of the intervention is to halt contagion, not to end the recession … In the week after the market euphoria at the Bank's decision, private investors, worried about who is first to be repaid in a crisis, are not rushing to return and the ECB still has to address the moral hazard it has created by appearing to guarantee 'last resort' funding to countries still likely to go off track."