The European Union will need to provide significant debt relief for Greece if it is to persuade the International Monetary Fund to put its financial clout behind the country’s third bailout package, the Washington-based organisation has said.
After what was described as a cordial meeting between the IMF’s managing director, Christine Lagarde, and the Greek prime minister, Alexis Tsipras, on the sidelines of the World Economic Forum in Davos, the fund said it was only prepared to support the recession-ravaged eurozone country on a strings-attached basis.
It said Greece had to be prepared to implement a tough package of economic reform and the country’s eurozone partners had to be willing to write down Greece’s debts.
The IMF took part in the first two Greek bailouts but is concerned that, at 175% of GDP, Greece’s debts are too burdensome and will prevent a lasting recovery. Lagarde told Tsipras the IMF regarded reform of Greece’s pension system, which accounts for 10% of GDP, as vital.
The IMF said of the talks: “The managing director reiterated that the IMF stands ready to continue to support Greece in achieving robust economic growth and sustainable public finances through a credible and comprehensive medium-term economic programme.
“Such a programme would require strong economic policies, not least pension reforms as well as significant debt relief from Greece’s European partners to ensure that debt is on a sustainable downward trajectory.”
Earlier in the day, Tsipras told Davos he was committed to reforming the Greek economy, which lost 25% of its GDP through austerity programmes which sent jobless rates to twice the eurozone average. But he criticised Europe’s insistence on lowering budget deficits, saying: “We must all understand that, next to balanced budgets, we must also have growth … We need to be more realistic, and show more solidarity too.”
The German finance minister, Wolfgang Schäuble, appeared unimpressed by Tsipras’s call for greater solidarity, and suggested he needed to deliver on the promises made to creditors. “My advice is, if we want to make Europe stronger we should implement what we agreed to implement. We can simply say, ‘implementation, stupid’,” Schäuble said, in a dig at the Greek leader echoing the catchphrase from Bill Clinton’s 1992 US election campaign.
source: The Guardian