Wednesday

8th Apr 2020

Schaeuble rebukes IMF boss on eurozone debt

International Monetary Fund (IMF) boss Christine Lagarde and German finance minister Wolfgang Schaeuble went on collision course on Thursday (11 October) on the subject of eurozone debt and deficits.

Speaking at TV debate in the IMF's annual meeting in Tokyo, Lagarde said that countries should not be obliged to keep to ambitious deficit reduction targets if their economies remained stagnant, adding that higher public spending and tax cuts could be used as stimulus measures.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Schaeuble hit back, saying Lagarde is contradicting the IMF's stance on austerity.

The fund had warned "time and again" that Western economies needed to prioritise debt reduction, he said.

"When there is a certain medium-term goal, it doesn't build confidence if one starts going in a different direction," he added.

The IMF chief at a separate press conference earlier in the day had struck a different tone, describing runaway government debt levels as the greatest problem facing western economies, commenting that they are at "wartime levels." 

"Without growth, the future of the global economy is in jeopardy, and perhaps the greatest roadblock will be the huge legacy of public debt," she had said.

Meanwhile, in another move likely to rile Berlin, Lagarde indicated the Fund is prepared to give debt-ridden Greece an extra two years to push through deficit reduction plans aimed at bringing the country's debt mountain, which currently stands at around 160 per cent of GDP, under control.

"Sometimes it is better to have more time," she said.

Berlin is coming under increasing pressure to take a more flexible approach to bailouts as the eurozone's economic woes deepen.

Earlier this week the IMF cut its growth projections for the eurozone, which it said would expand by 0.2 per cent in 2013. It also confirmed that the 17 eurozone economies would contract by 0.4 per cent in 2012.

The economic pain remains most acute in the five EU countries receiving emergency funding, with Greece, Portugal and Spain in particular difficulty.

The eurozone debt crisis will again take centre stage at next week's EU summit in Brussels when EU leaders try to flesh out plans for a growth and jobs pact agreed at the June summit.

Eurozone gives Greece 10-day ultimatum

Eurozone ministers have given Greece 10 days to implement budget cuts in return for a bailout cash, as Germany Merkel braves protesters on a visit to Athens.

No breakthrough at EU budget summit

EU leaders failed to reach agreement on the EU's long-term budget, as richer states and poorer 'cohesion countries' locked horns. The impasse continues over how to fund the Brexit gap.

EU leaders struggling to break budget deadlock

Cuts to innovation, space, neighbourhood and other programme-spending push down the latest budget proposal on the table of EU leaders. Rebates could stay on, to win the support of the net-payers for a deal.

Coronavirus

ECB promises (almost) whatever it takes

The eurozone's central bank has promised to buy up to €750bn of government and private bonds in new pandemic counter-measures.

Opinion

What does coronavirus 'Black Swan' mean for markets?

Falling demand and prices for oil and raw materials will revive the risk of deflation. The collapse in international trade and long-term rethinking of China's role as the major hub for the production of consumer goods and electronics is inevitable.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Join EUobserver

Support quality EU news

Join us