Business World

Wednesday 20 June 2018

No need for Greek debt relief - IMF

IMF managing director Christine Lagarde
IMF managing director Christine Lagarde

Michael Shields and Peter Flanagan

A form of debt restructuring rather than outright forgiveness should enable Greece to handle its "unviable" debt burden, the head of the International Monetary Fund (IMF) has said.

The IMF has yet to make clear if it will participate in the third €86bn international bailout that Greece signed up to in early August, having argued in favour of a partial writedown of a debt burden it considers unsustainable in its current form.

The IMF has said previously that Greece needs a form of debt forgiveness if it is ever to get its debt onto a sustainable profile.

In July, the fund had threatened to withdraw from talks surrounding a third bailout for Greece if some form of debt relief was not part of the new aid package.

Greece's eurozone creditors, notably Germany, have ruled out a writedown but are willing to consider other forms of restructuring, such as lengthening maturities.

Asked about those differences, IMF managing director Christine Lagarde told Swiss newspaper 'Le Temps': "The debate on cancelling the debt has never been open, I don't think it is necessary to open it if things go well.

"We are talking about extending maturities, reducing rates, (making) exemptions for a certain period of time. We are not speaking about cancelling debt," she said.

The interview made no mention of whether the IMF will take part in the new bailout, which Lagarde has previously said it will make a decision on by October.

Turning to China, Lagarde said she expected the country's economic growth rate to remain close to previous estimates even if some sort of slowdown was inevitable after its rapid expansion.

China devalued its yuan currency this month after exports tumbled in July, spooking global markets worried that a main driver of growth was running out of steam.

"The slowdown was predictable, predicted, unavoidable," Lagarde was quoted as saying.

"We expect that China will have a growth rate of 6.8pc. It may be a little less." The IMF did not believe growth would fall to 4 or 4.5pc, as some foresaw.

Noting that a drop in commodity prices had hit many emerging markets, she said those economies were "at the centre of our attention."

In numbers

€86bn - Cost of the third Greek bailout

€233bn - Cost of the first two Greek bailouts

30.2 - Greek PMI in August. The EU average is 52.4


Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business