Greek debt crisis has revealed new strains between the International Monetary Fund and European officials
The Greek debt crisis has revealed new strains between the International Monetary Fund and European officials, with the two sides at odds over how to head off a looming default by Athens.
In a rare public disagreement, Eurogroup President Jean-Claude Juncker and IMF Managing Director Christine Lagarde
clashed openly Monday on a key debt target in Greece\'s bailout program.
Speaking after a Eurozone finance ministers meeting, Juncker said the country\'s debt target of 120 percent of gross domestic product should be put back two years to 2022. The current level is an untenable 170 percent.
Lagarde, at the same press conference, said she believed the target should remain at 2020, the original date in Greece\'s second bailout agreed earlier this year.
\"It is critical that the Greek debt be sustainable,\" Lagarde said, admitting that \"we have differences; we are working, trying to resolve them.\"
Differences on how to get Greece on the path to fiscal stability, ignite economic growth and prevent a rupture of the Eurozone have been evident among the \"troika\" rescue lenders -- the EU, IMF and European Central Bank -- since the crisis began.
The tensions have burst into the open, however, as the troika has worked to finalise a key report on Greece\'s progress and decide what Athens needs to do to get a new aid release.
If Greece cannot get the 31.2 billion euro ($39.6 billion) disbursement expected, it could be forced to default on its debt.
\"This not a new disagreement,\" said Jacob Kierkegaard of the Peterson Institute in Washington.
\"It has been brewing for quite a while, and quite clearly it is at the heart of why the troika report has taken so long to be published.\"
The IMF, which has already committed to Greece its largest loan ever -- 28 billion euros or $35.5 billion -- has officially shown no willingness to move Athens\' debt ratio target.
The target was a key benchmark set for the IMF\'s participation in Greece\'s rescue, a level \"sustainable\" and acceptable to the fund\'s 188 member states.
The global emergency lender feels that the Europeans must take it upon themselves, one way or another, to reduce the debt service burden on Athens.
Paulo Nogueira Batista, who represents Brazil and 10 other countries on the IMF executive board, which signs off on loans, said the Europeans needed to give Athens breathing room.
\"I believe that some form of additional relief or support from the official sector of the euro area is probably needed,\" Nogueira told AFP.
\"This may be additional finance; this might be some relief,\" he said, stressing he was not speaking on behalf of the Fund.
Arvind Virmani, until this month India\'s executive director, said last week that Greece\'s debt cannot be made sustainable \"without a drastic debt write-off ... no matter what policy reforms the Greek government undertakes.\"
Options could include writing off the face value of the debt, cutting the interest rate on the bonds, or the Greek government buying back its own debt at reduced prices.
Whatever the case, the pressure is mounting, specifically on European institutions, to take the hit.
Private sector creditors already took a massive write-off of their holdings of Greek debt in the deal struck early this year.
Nogueira said the IMF, which holds preferred status among lenders, should not be the one to do so.
\"What I don\'t accept is the idea that the preferred IMF status could be challenged. That would be highly problematic, deeply problematic, because this status implies that any additional debt relief, debt restructuring, would have to involve other creditors than the IMF.\"
\"The Fund has already lent an enormous amount of money to Greece. It has overextended itself in financing Greece. So I will not support any call for additional resources from the IMF to Greece,\" he said.
Kierkegaard said the euro area does not want to give Greece any debt relief until the country\'s reform program has progressed further.
\"They fear that would loose leverage over Athens if they do so,\" he said.
With the troika at odds, Greek Finance Minister Yannis Stournaras warned Tuesday that the country faces a \"very high\" risk of default, which could rock the foundations of the Eurozone.
\"Bankrupt, insolvency. We have to be very careful. I understand (our partners) press Greece to take some prior actions (agreed in return for help), but now the risk of an accident is very high,\" he told the European Parliament.