EU, IMF at odds over Greek debt

Eurozone officials have reacted tersely to the International Monetary Fund’s insistence that Greek debt be restructured, suggesting that Europe and the Washington-based organization are drifting further apart on how the Greek bailout should proceed.

A number of top eurozone figures – including European Central Bank executive board member Joerg Asmussen (photo), head of the European Stability Mechanism Klaus Regling and European Economic and Monetary Affairs Commissioner Olli Rehn – are in Washington for discussions with IMF officials. The Europeans, however, seemed annoyed by comments from IMF Managing Director Christine Lagarde in which she urged the eurozone to provide Greece with debt relief.

Following Lagarde’s news conference on Thursday, eurozone decision makers displayed their unhappiness that the issue of a haircut to official sector loans, or OSI, had been revived. When questioned about this issue by Kathimerini at a panel discussion, Asmussen said that it is easy to suggest an OSI when the IMF is “talking about other people’s money” and has preferred creditor status itself, meaning its loans to Greece will be paid back in full.

Rehn and Regling also expressed their objections to the idea of a haircut. “We’ve already had two rounds of private sector involvement concerning Greece,” Rehn said. “Personally I do not see that haircuts are either something we should aim for or would be reasonable – rather, the arsenal would be related to the extension of loan maturities and a further reduction of interest rates.”

Regling said interest rate cuts and maturity extensions are “economically like a haircut.”

Sources in Brussels told Kathimerini that the latest round of comments from the IMF regarding debt restructuring should be seen as an attempt to make up for the fact that the Fund did not push as strongly as some of its members wanted for a haircut when the first Greek bailout was signed in 2010.

In Athens, Finance Minister Yannis Stournaras repeated his commitment that no new wage or pension cuts would be adopted by the government. During a parliamentary discussion, he defended the bailout agreement between Greece and its lenders. “One of the most painful realities of the post-dictatorship era is that serious and long-term growth plans for the economy were not drawn up,” he said. “It is no coincidence that the [EU-IMF] memorandum we have is, despite its weaknesses, the only policy document that sets specific targets that are binding for the whole Greek state, whether we like it or not.”