Lagarde questions IMF Greek debt participation

17/6/2016

By Mehreen Khan

Christine Lagarde has thrown fresh doubt on the International Monetary Fund’s financial participation in Greece’s €86bn bail-out, refusing to “pass judgment” on a provisional agreement for debt relief thrashed out between creditors last month.

Speaking in Austria on Friday, Ms Lagarde said she would wait and see before judging progress on the country’s bailout deal after the IMF has consistently called for lower fiscal targets and bold debt restructuring, clashing with its European partners, writes Mehreen Khan.

“We’ll see”, Ms Lagarde told an audience with the Austrian finance minister, warning that “more marathon” meetings could lie head for creditors this year.

She also added that the IMF still sees Greece’s debt as unsustainable at its current levels of close to 180 per cent of GDP.

“You measure, you determine what is the likely growth, the cost of financing, and see if [the deal] can walk with two legs,” she said.

In May, the IMF agreed in principle to a series of long-term but unspecified debt relief measure to kick in after the end of Greece’s bailout in 2018

But the Fund did not formally commit any of its cash to the bailout and will not do so before it makes fresh calculations about the sustainability of the debt burden by the end of the year.

IMF participation is a crucial demand for the German government but differences between European creditors and the Washington-based fund remain.

The EU remains far more optimistic about the future trajectory of GDP growth, debt ratios and the size of the country’s fiscal surplus.

When asked about May’s debt relief agreement, Ms Lagarde replied “which debt relief agreement are you talking about?” following a eurozone finance ministers meeting on Thursday.

“It is difficult to comment on an agreement we were not signatory to at the time,” said Ms Lagarde.

“We do not have a programme with Greece. The IMF is engaged and was very well represented at the May meeting during which lots of discussions took place,” she said, adding:

''We believe for us to be engaged under a programme, a debt operation would have to be assessed on the basis of a new debt sustainability analysis that would be handled on the basis of reforms conducted, the general framework, and growth assumptions that will all be adequately measured later on.''

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