World

Wednesday 30 July 2014

IMF’s Christine Lagarde cuts Asia trip short to attend meeting about Greece

Lesley Wroughton

Published 15/11/2012|12:36

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THE head of the International Monetary Fund, Christine Lagarde, will cut short a visit to Asia to attend a crucial Eurogroup meeting in Brussels next week amid divisions with European leaders over how Greece can reduce its debts.

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"The managing director will participate in the eurogroup meeting on Nov. 20 as she usually does and that will mean shortening her current trip to Asia," IMF spokesman Gerry Rice said on Thursday.



Disagreement over how to shrink Greece's debt unexpectedly flared into the open last week during a news conference in Brussels when Jean-Claude Juncker, who chairs the eurogroup of finance ministers, said Greece should be given until 2022 to lower its debt-to-GDP ratio to 120pc.



Lagarde, sitting next to Juncker at the time, disagreed and insisted that Greece should meet the target of 120pc of GDP by 2020 previously agreed in its bailout so that its debt is put on a sustainable path.



Lagarde, who is currently in the Philippines as part of a visit to Southeast Asia, had been scheduled to attend a meeting of ASEAN nations in Cambodia early next week.



Instead, she will return to Brussels for a meeting of the 17-nation Eurogroup, which will try to flesh out a deal ahead of a European leaders' meeting later next week.



In remarks in Malaysia on Wednesday, Lagarde insisted that Greece needs a lasting solutions to its debt burden to avoid a prolonged crisis and possibly more bailouts.



The IMF wants euro zone governments to write off some of Greece's debt to make it more manageable. Another solution could be if euro zone governments lower interest rates on outstanding Greek debt or extends maturities on loans.



With Greece's overall debt pile set to hit 190 percent of GDP next year, the IMF has set 120pc as the target, saying that anything much above that is not sustainable given weak growth prospects and high external borrowing requirements.



Resolving Greece's problems will probably require a writedown of at least part of its debt, and Spain also urgently needs to seek a bailout, European Central Bank Governing Council member Luc Coene was quoted as saying.



Coene made the comments at a debate at the University of Ghent, Belgian daily De Standaard reported on Thursday.



On Greece, Coene appeared to share the position of IMF that some Greek debt must be written down.



Germany, the biggest contributor to euro zone bailout funds, has repeatedly rejected the idea of euro zone governments writing down their holdings of Greek debt, saying it would be illegal.



Banks, insurers and other private sector investors holding about €206bn of Greek bonds took a 53.5pc reduction on the nominal value of their securities earlier this year.



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