Greece faces IMF default on July 1 without a deal, says Lagarde [Update]

Greece will be in default with the International Monetary Fund at the start of July if it fails to make a repayment on June 30 because there is no grace period or possibility to delay, IMF Managing Director Christine Lagarde said on Thursday.

“It will be in default, it will be in arrears vis-a-vis the

IMF on July 1, but I hope it is not the case, I really do,” Lagarde told reporters following a meeting with the Luxembourg finance minister.

“There is no grace period or two-month delay, as I have seen here and there,” she said, speaking before a eurozone finance ministers meeting in Luxembourg.

Lagarde said a reform of the Greek pension system was critical to sealing a deal with Athens, although small pensioners should be protected.

“Everybody knows that. The Greek authorities know that as well. They have to address all sorts of issues,” she said.

“It is not a question of cutting the small pensions, but the programme of financing the pensions has to hold,” she said, adding that more than 16 percent of Greece’s economic output went to pay pension benefits, which was “way more than the average, pretty much everywhere.”

She also defended the IMF programme with Greece as “credible and flexible” and was supported by the many countries that made up the Washington-based lender.