IMF's Lagarde sees deal with creditors soon
By Tom Ellis
Greece has a reliable government that is determined to put the country back on the path to stability and growth, International Monetary Fund Managing Director Christine Lagarde told Kathimerini over the weekend, adding that she believes the government is close to a deal with its creditors over the new austerity program on which the disbursement of a 31.5 billion tranche of funding depends.
“It is clearly a country that has faced some very dramatic changes on the political scene with one election after another, but now there is a coalition government that is reliable and committed to reforms and bringing the economy back to a path of growth and stability,” Lagarde said on the sidelines of the annual IMF meeting in Tokyo.
Lagarde also made references to ongoing negotiations between the Greek government and representatives from the IMF, the European Commission and the European Central Bank -- collectively known as the troika -- in Athens over spending cuts worth 13.5 billion euros.
“They are getting much closer to settling on the list of expenditure cuts and the list of additional revenues in order to close this fiscal deficit for that part of the program,” Lagarde said. “There is still plenty of work to be done before this exercise is completed, but there are also good things happening.”
The progress of reforms so far has brought the debt-wracked country closer to achieving its fiscal targets, the IMF managing director said, though she stressed that Greece is still not out of the woods.
“The fiscal adjustment that has taken place is getting Greece closer to a primary surplus, and the country is gaining some competitiveness, not enough yet, but there is significant improvement under way,” Lagarde said.
“A lot of work needs to be done,” she added.
In talks in Tokyo, Lagarde noted that creditors need to take a broader approach, which would not be limited to fiscal adjustment and structural reforms, but would also ensure the sustainability of the public debt and further funding for Greece.
She outlined four policy areas for indebted countries: completion of financial sector reform; credible, medium-term strategies to bring down debt; creating the conditions for growth that are more inclusive and that are, more importantly, likely to create jobs; and facing up to the fundamental issue of global imbalances.
“From our perspective, all four chapters have to be looked at and we will spare no time or effort to actually do as much as we can in order to help Greece,” Lagarde told the IMF meeting.
Lagarde said that she is in favor of Greece being granted an extension to meet the fiscal targets set by its creditors, saying that an additional two years is “necessary for the country to actually face the fiscal consolidation program that is considered” and putting tacit pressure on Germany and other members of the eurozone who have challenged the idea.
Over the past few weeks Lagarde has become more vocally in favor of an extension to the Greek program, with her statement coming in the wake of the IMF report on Greece which suggests that the internal devaluation will have multiple negative consequences.
“Instead of frontloading heavily, it is sometimes better -- given circumstances and the fact that many countries at the same time go through that same set of policies with a view to reducing their deficit -- to have a bit more time,” Lagarde said, also referring to Portugal and Spain.
The IMF has repeatedly called for policies that enjoy a certain degree of social acceptance so that their implementation is politically viable, arguing that the aim is to gradually regain competitiveness rather than to aim for impossible targets in numbers alone.
“Our purpose is to make sure that Greece is back on its feet, that it can one day return to markets, that it does not have the need for constant support, and that is what we are completely targeted for. We want to help the country and to help it stand on its own,” Lagarde said.