26th Oct 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

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.


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

News in Brief

  1. Report: EU to rule on Gazprom pipeline link
  2. France registers biggest fall in unemployment for 20 years
  3. May feared businesses would leave the UK over Brexit
  4. US judge approves deal to buy back dirty VW diesel cars
  5. MEPs lift Jean-Marie Le Pen immunity
  6. Norway agrees to host 330 US soldiers
  7. Eurozone fund agrees €2.8bn Greece payment
  8. French shift 2,300 from Calais migrant camp

Stakeholders' Highlights

  1. EFADraft Bill for a 2nd Scottish Independence Referendum
  2. UNICEFCalls on European Council to Address Plight of Refugee and Migrant Children
  3. ECTAJoin us on 9-10 November in Brussels and Discover the new EU Digital Landscape
  4. Access NowCan you Hear me now? Verizon’s Opportunity to Stand for Global Users
  5. Belgrade Security ForumMeaningful Dialogue Missing Not Only in the Balkans, but Throughout Europe
  6. EuropecheEU Fishing Sector Celebrates Sustainably Sourced Seafood in EU Parliament
  7. World VisionWomen and Girls Urge EU Leadership to Help end Gender-based Violence
  8. Dialogue PlatformIs Jihadism Blind Spot of Western Intellectuals ? Wednesday 26 October
  9. Belgrade Security ForumGet the Latest News and Updates on the Belgrade Security Forum @BelSecForum
  10. Crowdsourcing Week EuropeMaster Crowdsourcing, Crowdfunding and Innovation! Conference 21 November - 10% Discount Code CSWEU16
  11. EJCEU Parliament's Roadmap for Relations with Iran a Massive Missed Opportunity
  12. Nordic Council of MinistersFish Skin on Bare Skin: Turning Fish Waste into Sustainable Fashion