As Greece waits fretfully for whether Eurozone leaders this week will release a delayed $38.8 billion installment needed to keep the country’s economy afloat, International Monetary Fund (IMF) chief Christine Lagarde said a permanent answer must be found to its debt problems and be “rooted in reality and not in wishful thinking.”
The European Union and European Central Bank, along with the IMF, make up the Troika which put up $152 billion in a first series of rescue loans but has so far withheld the first tranche in a second pending bailout of $173 billion.
Greek Prime Minister Antonis Samaras pushed a $17.45 billion spending cut and tax hike plan through Parliament as a condition of getting the money but Eurozone chiefs have been waiting for a report from Troika inspectors on whether the plan to reduce Greece’s $430 billion debt is sustainable.
Lagarde, the IMF’s Managing Director, canceled the last leg of her visit to Asia, skipping a Southeast Asian summit in Cambodia, to return to Brussels for a meeting on Nov. 20 of the Eurogroup on Greece. She told Reuters she would push for a permanent solution to Greece’s debts to avoid prolonged uncertainty and further damage to the Greek economy.
To Lagarde, that means countries in the Eurozone should send a strong signal they remain committed to Greece by agreeing to reduce the debt Athens owes them. “I am always trying to be constructive but I am driven by two objectives,” she said in an interview, “to build and approve a program for Greece that is solid, that is convincing today, that will be sustainable tomorrow, that is rooted in reality and not in wishful thinking.
“The second objective is to maintain the integrity, credibility and quality of advice that we are giving, not for the Fund itself, which obviously is a concern of mine, but to lend that to the Europeans because that is what they are interested in,” she said.
In an unusually public airing of disagreement that flared during a news conference in Brussels on Nov. 13, Eurozone chief Jean-Claude Juncker, said the target of reducing Greece’s debt to 120 percent of gross domestic product by 2020 should be moved by two years to 2022, but Lagarde snapped in disagreement, insisting the country adhere to the original target. “They might resent me … but that is in their interest,” Lagarde said of the European creditors. “The two objectives are critical for me, both of them,” she added.
Lagarde has previously said the IMF does not walk away from countries, but without a European deal on Greece’s debt and financing she cannot take the matter to the IMF board of member countries for approval. “(Markets) are not going to be convinced today that the solution holds in the medium term,” she said of Greece’s debt problems. “And that is what we need to focus on.”
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