EU, IMF clash over Greece revives debt crisis fears

Tue Nov 13, 2012 10:23am EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Jan Strupczewski and Annika Breidthardt

BRUSSELS (Reuters) - A public clash between Greece's international lenders over how Athens can bring its debts down to a sustainable level has reignited fears that Europe's troubles could flare up anew.

Euro zone finance ministers suggested Greece, where the euro zone debt crisis began, should be given until 2022 to lower its debt to GDP ratio to 120 percent but International Monetary Fund chief Christine Lagarde insisted the existing target of 2020 should remain, in an unusually public airing of disagreement.

Beneath her sharp exchange with Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, lies a rift over whether euro zone governments need to write off some of Greece's debt to them to make it manageable. IMF officials have pressed for such a "haircut" while Germany, the biggest contributor to euro zone bailout funds, has vehemently rejected it as illegal.

German Finance Minister Wolfgang Schaeuble told reporters on Tuesday that the 2020 deadline was "a little too ambitious".

"There's a debate about a haircut for official creditors. On that I will say, and most countries have said so in the past few weeks, that that's legally not possible," he added.

Chancellor Angela Merkel has signaled she wants to keep Greece in the euro zone but is determined to avoid losses for German taxpayers before a general election in September 2013.

With so much stake, diplomats remain confident that a deal will be done to release a 31.5-billion-euro tranche of bailout money, which Athens urgently requires to avert bankruptcy.

But it is a way off yet.   Continued...

 
Spain's Economy Minister Luis de Guindos (C), Luxembourg's Prime Minister and Eurogroup Chairman Jean-Claude Juncker (L) and International Monetary Fund (IMF) Managing Director Christine Lagarde (R) attend a Eurogroup meeting in Brussels November 12, 2012. REUTERS/Yves Herman