Lagarde cuts visit short for Greek debt meeting

MANILA - Reuters

Lagarde arrives for a press meeting ahead of a lecture in Kuala Lumpur. AP photo

The head of the International Monetary Fund, Christine Lagarde, has decided to cut short a visit to Asia to attend a crucial Eurogroup meeting in Brussels next week amid divisions with European leaders over how Greece can reduce its debts.

“The managing director will participate in the eurogroup meeting on Nov. 20 as she usually does and that will mean shortening her current trip to Asia,” IMF spokesman Gerry Rice said yesterday.

Disagreement over how to shrink Greece’s debt unexpectedly flared into the open last week during a news conference in Brussels when Jean-Claude Juncker, who chairs the eurogroup of finance ministers, said Greece should be given until 2022 to lower its debt-to-GDP ratio to 120 percent.

Lagarde, sitting next to Juncker at the time, disagreed and insisted that Greece should meet the target of 120 percent of GDP by 2020 previously agreed in its bailout so that its debt is put on a sustainable path. Lagarde, who is currently in the Philippines as part of a visit to Southeast Asia, had been scheduled to attend a meeting of ASEAN nations in Cambodia early next week.

Instead, she will return to Brussels for a meeting of the 17-nation euro group, which will try to flesh out a deal ahead of a European leaders’ meeting later next week.

Warnings over bailouts

In remarks in Malaysia on Nov. 14, Lagarde insisted that Greece needs a lasting solutions to its debt burden to avoid a prolonged crisis and possibly more bailouts. The IMF wants eurozone governments to write off some of Greece’s debt to make it more manageable. Another solution could be if euro zone governments lower interest rates on outstanding Greek debt or extends maturities on loans. With Greece’s overall debt pile set to hit 190 percent of GDP next year, the IMF has set 120 percent as the target, saying that anything much above that is not sustainable given weak growth prospects and high external borrowing requirements. Resolving Greece’s problems will probably require a writedown of at least part of its debt, and Spain also needs to seek a bailout, European Central Bank Governing Council member Luc Coene was quoted as saying.