The head of the International Monetary Fund (IMF) urged eurozone finance ministers to start talks on Greece’s debt relief together with discussions on Athens’ reform programme, according to a letter published by the Financial Times yesterday.
The finance ministers of the eurozone’s 19 countries will gather on May 9 in Brussels for an extraordinary meeting on Greece. They are meant to discuss Greece’s reform programme and a new set of contingency measures that Athens should adopt to ensure it will achieve agreed fiscal targets in 2018.
Successful reforms implementation in Athens would unlock bailout funds under a financial programme agreed by Greece and eurozone countries in July and would pave the way for talks on Greece’s debt relief.
“We believe that specific measures, debt restructuring, and financing must now be discussed simultaneously,” IMF’s Christine Lagarde wrote to eurozone ministers ahead of their meeting next week.
Lagarde insisted that the IMF considered the bailout programme’s target of a Greek primary surplus of 3.5% of gross domestic product in 2018 as very difficult to reach and “possibly counterproductive”.
Eurozone ministers, led by Germany, have requested this target. The IMF would be satisfied with a 1.5% primary surplus, which means a budget surplus before debt payments. The IMF would not join the Greek bailout programme if fiscal targets were not realistic and without a debt relief, Lagarde said.
To bridge the gap between the IMF and eurozone ministers, lenders agreed in April to ask Greece a set of contingency measures that would apply only if Athens failed to reach a 3.5% primary surplus in 2018.
Lagarde insisted that these measures should be legislated upfront and include further reforms of the Greek pension and tax system. “Unfortunately, the contingency mechanism that Greece is proposing does not include such reforms,” Lagarde wrote in her letter.