ECONOMY

Lagarde says loan tranche held back until vote

International Monetary Fund managing director Christine Lagarde says Greece will not receive its next loan tranche until the result of a planned referendum on the country?s euro membership has taken place

?I welcome the prime minister?s indication that the referendum which has been announced will take place as soon as possible so that the euro summit agreement can be implemented expeditiously,? said Lagarde following talks with Papandreou and other eurozone leaders at the sidelines of the G20 meeting in Cannes, France, on Wednesday.

?As soon as the referendum is completed, and all uncertainty removed, I will make a recommendation to the IMF Executive Board regarding the sixth tranche of our loan to support Greece?s economic program.?

Greece was due to receive 8 billion euros this month but Prime Minister George Papandreou?s decision to call for a referendum means the Finance Ministry will have to find a way of administering public finances so the country can keep operating without this loan instalment until the political landscape has cleared.

Papandreou had indicated that he wanted a referendum on whether Greece should adopt the deal agreed in Brussels last week. The agreement foresees Greek debt being reduced by some 100 billion euros and Athens receiving another 130 billion euros in loans. Lagarde said that even though Greeks will not vote on this package, it remains a good deal for Greece.

?I remain convinced that the agreement reached by the leaders of the euro area at their summit last week, which includes a substantive reduction in Greece?s debt burden and additional financial support for a new ambitious program, will greatly benefit Greece by helping to restore growth and create jobs,? she said.