20th Oct 2016

EU and IMF clash over Greek debt plan

  • Lagarde and Juncker: Eurozone ministers want to extend Greece's debt deal to 2022 (Photo:

Eurozone finance ministers and the International Monetary Fund (IMF) clashed publicly on Monday (12 November) evening over how long Greece should get to bring its debt under control.

Jean Claude-Juncker, who chairs the meetings of euro finance ministers, said euro countries want to give Greece two more years – until 2022 – to cut its debt mountain to 120 percent of GDP.

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When Juncker insisted on the new timeline, IMF chief Christine Lagarde, sitting alongside him in a press conference, appeared to roll her eyes.

"In our view, the appropriate timetable is 120 per cent by 2020 ... We clearly have different views," she said.

There will be another meeting on 20 November to see if the two sides can resolve their differences.

But the highly unusual public airing of the disagreement does not bode well for the international lenders finding an agreement on a new debt plan for Greece next Tuesday.

Both sides have to agree in order for the next bailout tranche (€31.5bn) to be released to Athens.

The spat between the EU and the IMF has been simmering for some time.

Lagarde believes the 2020 deadline should be stuck to and that eurozone countries should accept losses on their loans. The EU side believes Greece can return to growth and service its debt if it is given a bit longer to do so.

Member states taking a loss on their loans is seen as big political no-no, particular in Germany.

Juncker said that his "personal feeling" is that public sector writedowns – where member states take a loss – will not be the route that is taken.

The further delay comes despite the fact the Greek parliament last week backed a tough austerity budget that increases the retirement age to 67 and imposes further pension and salary cuts, as well as a 35 percent reduction on redundancy pay.

Greece also faces a bill for €5 billion of treasury notes on Friday (16 November) and will now ask for the bills to be rolled-over.

"I won't tell you how [we will solve this problem], but there won't be any problem on November 16," Juncker said.

Meanwhile, economic affairs commissioner Olli Rehn praised the resolve of the Greek government for forcing through unpopular economic reforms, commenting that "words have been backed by deeds."

He added that it is "to debunk the perception that no progress has been made, this is damaging, unfair and simply wrong."

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