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IMF’s Lagarde says important for Eurozone to forge deal on Greece

Lagarde says Eurogroup meeting to focus on putting Greece back on sustainable path

  • Reuters and AFP
  • Published: 18:00 November 16, 2012
  • Gulf News

Manila: A crucial Eurogroup meeting next week on Greece should forge a deal that will put the insolvent country’s economy on a sustainable path, International Monetary Fund (IMF) Managing Director Christine Lagarde said on Friday.

The IMF chief is cutting short her tour of Asia to attend the Eurogroup meeting in Brussels on November 20.

A row between Eurozone governments and the IMF over how to make Greece’s giant debt mountain manageable is holding up the release of €31 billion euros (Dh146 billion or $39.5 billion) in emergency loans needed to keep Athens afloat.

“It is not over until the fat lady sings as the saying goes,” Lagarde told reporters when asked by reporters in Manila about the possibility of a deal on Greece next week.

“It is a question of working hard, putting our mind to it, making sure that we focus on the same objective which is that the country in particular, Greece, can operate on a sustainable basis, can recover, can get back on its feet, can reaccess markets as early as possible.”

Target

Lagarde earlier this week publicly disagreed with Eurozone finance ministers who have suggested that Greece should be given until 2022 to lower its debt to gross domestic product (GDP) ratio to 120 per cent. Lagarde has insisted the existing target of 2020 should remain.

European policymakers must also implement policy commitments to help lift the Eurozone economy next year, Lagarde said in Manila.

Banks, insurers and other private sector investors holding about 206 billion euros of Greek bonds took a 53.5 percent reduction on the nominal value of their securities earlier this year.

Greece’s total debt is forecast to rise to nearly 190 per cent of gross domestic product next year, meaning it is highly unlikely to fall back to 120 per cent of GDP by 2020, the level the IMF has said is the maximum sustainable in the long term.

Debt management

Meanwhile, Greece on Friday was in the process of repaying a five-billion-euro treasury bill with money raised from another debt issue this week, thus avoiding a payment default, a debt management agency source said.

“The payment is proceeding without problems, the necessary money is present,” an agency source told AFP. He did not specify when the process would be complete.

Faced with a financing gap from a stalled EU-IMF loan instalment that is still pending, Greece raised the necessary money earlier in the week with a sale of three-month and one-month treasury bills.

It drew €4.0 billion ($5.18 billion) on Tuesday and added another €938 million two days later.

Greek Prime Minister Antonis Samaras warned last month that the country would run out of money on Friday without the prompt release of funds from the European Union and International Monetary Fund.

Worth €31.2 billion overall, the EU-IMF loan payment was supposed to have been disbursed by July but was held back owing to reform delays and protracted political uncertainty after a four-month electoral campaign in Greece.

Eurozone finance ministers will meet on November 20 to discuss whether Athens will at last be given the funds, which are part of Greece’s second EU-IMF rescue package.

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