BARI: IMF chief Christine Lagarde on Friday (May 12) urged eurozone lenders to cut Greece some slack on its debts, as hopes rose that a deal on easing repayments could be wrapped up later this month.
The International Monetary Fund has made more generous debt relief a condition of its participation in an €86-billion (US$94-billion) bailout.
But several eurozone governments, led by Germany, are dragging their heels, insisting on more evidence of debt-plagued Greece delivering on reforms as a condition of green-lighting the third major rescue package for the country since 2010.
“We will carry on working on this debt relief package,” Lagarde said after talks on the issue on the sidelines of a meeting of G7 finance ministers and central bank governors in the southern Italian port of Bari.
“There is not enough clarity yet but I hope that the European partners will continue to progress in that.”
The former French finance minister added that the IMF’s position had not changed in the long-running saga.
“We have two issues, policies which are being voted on now, I hope, by the Greek authorities. Much progress has been made and we certainly hope that the Europeans will be far more specific in terms of debt relief, which is also an imperative.”
Eurozone ministers agreed in principle last year to extend the repayment terms of part of Greece’s debt if Athens delivered on pensions and tax reforms aimed at making the country’s public finances more sustainable.
LIGHT AT TUNNEL’S END
They have also said they will consider providing new lines of credit to replace more costly IMF loans, a move that would save Athens billions in interest every year.
An accord on the shape of the relief package is required soon. Athens needs the first tranche of the bailout to be delivered by July to ensure it can repay seven billion euros (US$7.6 billion) in maturing loans.
The issue is particularly sensitive in Germany, where the provision of debt relief to Greece is seen as a vote loser in the run-up to general elections in September.
On the other side of the debate, many economists have said a reluctance to write off some of Greece’s debts – equivalent to 180 per cent of GDP – has been counter-productive because of the negative impact deep cuts on public spending have had on economic activity.
A senior IMF official said the Europeans had to be ready to consider measures “that go well beyond” what they have agreed so far and to be more realistic about Greece’s growth prospects.
“We have to create fiscal space to (allow Greece) to undertake measures for growth,” the official said, on condition of anonymity.
European Finance Commissioner Pierre Moscovici said he was optimistic a deal with Greece would be wrapped up at a meeting of Eurozone finance ministers on May 22.
“I am confident the will is there and Greece will be able to turn the page on a too-long chapter of austerity and open a new chapter of growth and investment in a framework of stability,” he said. “After so many years of recession, the Greek people really need that.”
French Finance Minister Michel Sapin said the current Greek government deserved credit for “sorting out their economy and finances”. He added: “The ball is now in the camp of the Europeans who have to keep their side of the bargain.”