Bid to keep lid on Greek crisis as IMF criticises debt extension
Published 19/11/2012 | 05:00
There are hopes the lid will be kept on the Greek debt crisis this week as euro-area finance ministers meet in Brussels tomorrow to thrash out a solution to the Balkan nation's financial squeeze.
But with the IMF and the European Union having come to loggerheads last week over the timeline for reducing the beleaguered country's debt, a definitive resolution could again prove difficult to grasp.
Greece has been granted an additional two years to reach budget deficit goals in its bailout programme. European finance ministers will be discussing ways of plugging the €31bn funding gap resulting from that extension.
IMF managing director Christine Lagarde said over the weekend that she'll defend the IMF's credibility in talks on Greece, signalling a potential clash with euro-area finance chiefs over the country's debt sustainability.
She said she was approaching the talks feeling "patient and resilient".
Ms Lagarde took issue with European governments' decision to push back a debt reduction target by two years to 2022 against the fund's recommendations, raising questions over whether the IMF would keep financing Greece.
Agreement on how to reduce Greece's debt to sustainable levels is key to disbursing the next multi-billion euro tranche of aid under the bailout that euro nations co-finance with the IMF.
"We never leave the table," Ms Lagarde said. She declined to answer a question on whether the IMF has room for maneouver in the negotiations.
The IMF's goals are to achieve "a solid programme for Greece that convinces investors today that it will stand tomorrow, and the reliability, credibility, quality of the advice we give and that we lend to the Europeans," said Ms Lagarde.
The leader of Greece's Democratic Left party – the smallest of three parties that supports the country's coalition government – said yesterday that the nation's partners and international lenders now face their own responsibilities given the "tough sacrifices" made by the public.
He added that there was a need for a "drastic" cut on interest rate on loans taken since 2010 and that Greece should get interest-free financing for deficits during the fiscal adjustment process.
Italian Finance Minister Vittorio Grilli said he was confident finance chiefs would reach an agreement on aiding Greece.
"We know that there are several options for helping Greece get through this very important challenge," Mr Grilli said.
"I am clearly optimistic that we can come to a decision."
European leaders will also meet later next week to work on a new budget for the EU. France has already rejected proposals that would curb spending.