Lagarde returns to debate over debt relief

Lagarde returns to debate over debt relief

A form of debt restructuring rather than outright forgiveness should enable Greece to handle its “unsustainable” debt burden, the head of the International Monetary Fund was quoted as telling a Swiss newspaper on Saturday.

The IMF has yet to make clear if it will participate in the third Greek bailout, having argued in favor of a partial writedown of the country’s public debt, which it considers unsustainable at the moment.

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

Asked about those differences, IMF Managing Director Christine Lagarde told Saturday’s edition of Le Temps: “The debate on canceling 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 canceling debt.”

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.

Last week, however, German Finance Minister Wolfgang Schaeuble described IMF involvement in the program as “indispensable.”

Lagarde’s interview came as Klaus Regling, head of the European Stability Mechanism (ESM), told another publication that Europe will be able to handle future economic crises without the help of the IMF.

“Europeans will be able to tackle on their own the next crisis, which will come in the coming decades,” Spiegel quoted Regling as saying, in an advance excerpt from its next edition.

“Cooperation between the ESM, EU Commission and ECB is well practiced. Together they fulfill the tasks of a European monetary fund,” added Regling, with reference to the existing bailout fund, the EU executive, and the European Central Bank.

[Combined reports]

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