NEWS

Lagarde backs lower Greek surpluses

lagarde-backs-lower-greek-surpluses

In a much-needed boost to the Greek government’s calls for lower primary surplus targets, outgoing International Monetary Fund chief Christine Lagarde, who is expected to assume the top job at the European Central Bank, said Wednesday that the 3.5 percent primary surplus target was “excessive” and put too much pressure on the country’s recovering economy.

Lagarde, who has been nominated to succeed Mario Draghi, told the European Parliament’s committee on economic affairs that targets should be “carefully reviewed.”

Emphasizing that she was still speaking as head of the IMF and that her opinion on the matter was personal, Lagarde made the comments in response to a reporter’s question on the extent to which she would continue to defend that view on primary surplus targets from her new post at the ECB.

She noted that the IMF’s expressed stance on the matter was that the primary surplus target should be a maximum of between 1.5 and 2 percent of gross domestic product.

The comments were well received in Athens. “It appears that a positive dynamic is being created in the desired direction by leading circles of the institutions,” Finance Minister Christos Staikouras said, using the collective term for Greece’s creditors. He reiterated that the government’s main aim is to reduce the 3.5 percent primary surplus target agreed by the previous SYRIZA administration.

Prime Minister Kyriakos Mitsotakis has been lobbying foreign leaders to back the lowering of the targets for Greece as he tries to boost growth. As the SYRIZA government had agreed to 3.5 percent targets for this year and next, he has been pressing for a reduction after that.

Meanwhile Greek officials have floated the idea of the country including the return of European central banks’ profits from their Greek bond holdings in next year’s budget revenues in order to ease the primary surplus burden.

The issue is expected to be discussed by representatives of eurozone finance ministry officials at some point but it remains unclear what their stance will be as the revenue is not unconditional but linked to the completion of economic reforms by Greece.