[BRUSSELS] Eurozone finance ministers were set to withhold two billion euros from Greece's huge bailout at a meeting on Monday, European sources said, as tensions resurfaced just months after Athens narrowly avoided a euro exit.
Athens has failed to meet strict reform commitments, with differences over foreclosure rules as the leftist government of Prime Minister Alexis Tsipras insists on protections for low-income homeowners, officials said.
Creditors the European Union, the European Central Bank (ECB) and the International Monetary Fund (IMF) agreed an 86-billion-euro (S$131.9 billion) debt rescue on July 13 but set tough conditions requiring Athens to cut spending, raise taxes and modernise the economy.
"There will be no deal on Monday on the two billion payment," a senior European source told AFP, hours after senior eurozone officials failed to forge a compromise in preparation for the meeting of 19 eurozone finance ministers.
Two European sources added that a decision was likely later this week when senior eurozone officials hold a teleconference.
However France, which has backed Greece throughout the torrid bailout process, said earlier that, despite the disagreements, a deal to unlock the payment was still within reach on Monday.
"Greece has made considerable efforts (that are) all within the bailout agreement of July 13", French Finance Minister Michel Sapin told reporters in Paris as he headed for the talks.
"I understand the worries of the Greek government," Mr Sapin said, adding that France and Germany also had laws to limit bank seizures. "It's a bit strange that we're always asking more of Greece than what exists in creditor countries."
The renewed tensions hit the financial markets on Monday with Paris and Frankfurt stocks both down 0.20 per cent amid worries about Greece's banks.
Greece's two earlier bailouts, in 2010 and 2012, totalled 240 billion euros and more than 100 billion more in a private sector debt write-off, but Athens struggled to meet the stringent austerity and reform conditions.
The Tsipras government was expected to have finalised a series of so-called reform "milestones" by mid-October but has been stuck on the details.
Analysts warned that the delay will put off the even more sensitive debate over reducing Greece's massive debt pile, another key component of the bailout.
The IMF has said it will stay out of any further rescue of Greece if the country's debt is not scaled back, but harder line countries such as Germany are loath to offer Athens any favours.
"Sigh. And all this before we even get into discussions on debt relief which are infinitely harder," said analyst Raoul Ruparel, of Open Europe think tank in a tweet.
The Greek economy took a massive hit in July after the ECB cut off a lifeline to Greece's banks forcing strict capital controls that are partly still in place.
A stress test on Greece's banking system revealed earlier this month that lenders needed 14.4 billion euros to survive potential economic shocks.
That is less than the 25 billion euros earmarked for the recapitalisation of Greece's four major banks in the bailout package.
"Delay is not a big concern but it's not helpful in the recapitalisation discussion," another senior eurozone source told AFP.