Lagarde: No IMF in Greek bailout without debt relief

"That is why European countries admitted the principle of debt relief" in the euro summit statement signed Monday (13 July), she added.

While several eurozone countries, including Germany, are opposed to a haircut on the Greek debt, "there are other modalities", Lagarde said.

She did not say how much debt relief is needed, but she said three methods could be used "to make the Greek debt sustainable".

Greece's creditors - the EU, the IMF and the European Central Bank (ECB) "could significantly extend maturities, also extend the grace period when no repayment is done, and compress interest to the maximum," she said.

In any case, the IMF chief said, her institution will take part only if there is "a complete programme".

"A complete programme stands on two legs," she said.

"The first leg is a Greek leg: deeply reform the economy and hold a healthy fiscal line. The second leg is the creditors' leg: provide financing and restructure the debt to lighten the burden."

"This is not a whim," Lagarde said. "There are rules which are applied to all IMF member states."

The Eurogroup gave the green light on Thursday to open bailout negotiations when all eurozone member states have approved the euro summit agreement.

The European Stability Mechanism (ESM), the eurozone emergency fund, said Thursday it would provide €50 billion for the bailout.

ESM chief Klaus Regling said the remaining €32-36 billion needed to complete the bailout programme would be provided by the IMF, as well as privatisations and a possible Greek return on financial markets.

Bailout negotiations "will be laborious," Lagarde warned in her interview.

"We are not at the end of a process yet. A process is opening, with a very tight agenda and a huge challenge," she said.

"It will not be a road paved with roses."