IMF Managing Director Christine Lagarde said she is confident about Europe’s commitment to provide further debt relief to Greece if the debt-burdened euro zone country abides by the conditions of its bailout.
“I stand on the three-times repeated commitments by the euro partners to consider further measures and assistance to make sure that the Greek debt is reduced substantially” by 2020 and 2022, Lagarde told reporters in Washington on Thursday.
“I have no reasons to believe the Europeans would not themselves deliver on their undertaking vis-à-vis Greece,» she said.
The International Monetary Fund is one of a trio of lenders along with the European Commission and the European Central Bank to step in with a 240 billion euro ($317 billion) bailout to rescue Greece from a sovereign debt crisis and keep it in the euro zone.
IMF staff in a report published yesterday said there are about 11 billion euros ($14.5 billion) in financing needed for Greece by the end of 2015 that have not yet been indentified under its joint package with Europe. The report also reminded European officials of their commitment to reduce Greece’s debt burden to a target of 124 percent of gross domestic product by 2020, which they said may require agreeing to relief measures as early as next year.
Led by Germany, the euro zone has pledged to consider mild debt relief measures for Greece next year, such as extending maturities on rescue loans, to help the country reduce its mountain of debt and return to capital markets to fund itself.
But German Chancellor Angela Merkel and her government have in recent weeks repeatedly ruled out a further writedown of Greek debt, which has become an issue in the upcoming German elections in September.
Germany’s main opposition leader accused Merkel of covering up the likelihood German taxpayers will have to fund further euro zone bailouts. An open debate about loan losses could damage Merkel in the run-up to the vote.
European finance ministers agreed last year to cut the rates on bailout loans and suspend interest payments for a decade, while giving Greece more time to repay and engineering a Greek bond buyback. German Finance Minister Wolfgang Schaeuble last month opened the possibility of building on those measures while discarding a straight write-off.
“What channel it will take, what tools will be needed, what methodology will be applied is something that will have to be discussed by the euro partners, and with the euro partners, but the commitment is in my view what matters most,” Lagarde said.
[Reuters & Bloomberg]