IMF’s Lagarde says Greek debt cancellation never discussed

International Monetary Fund’s Managing Director Christine Lagarde says debt cancellation for Greece never discussed, asserts debt relief should suffice

Photo by: Reuters
Photo by: Reuters

International Monetary Fund Managing Director Christine Lagarde (L) speaks with former IMF managing director Dominique Strauss-Kahn in Paris, France, June 16, 2010

A form of debt restructuring rather than outright forgiveness should enable Greece to handle its "unviable" debt burden, the head of the International Monetary Fund (IMF) was quoted as telling a Swiss newspaper.

The IMF has yet to make clear if it will participate in the third 86 billion-euro ($96 billion) international bailout that Greece signed up to in early August, having argued in favour of a partial writedown of a debt burden it considers unsustainable in its current form.

Greece's eurozone creditors, notably Germany, have ruled out a writedown but are willing to consider other forms of restructuring such as a lengthening maturities.

Asked about those differences, IMF Managing Director Christine Lagarde told Saturday's edition of Le Temps: "The debate on cancelling the debt has never been open I don't think it is necessary to open it if things go well...

"We are talking about extending maturities, reducing rates, [making] exemptions for a certain period of time. We are not speaking about cancelling debt."

The interview made no mention of whether the IMF will take part in the new bailout, which Lagarde has previously said it will make a decision on by October.

Turning to China, Lagarde said she expected the country's economic growth rate to remain close to previous estimates even if some sort of slowdown was inevitable after its rapid expansion.

China devalued its yuan currency this month after exports tumbled in July, spooking global markets worried that a main driver of growth was running out of steam.

"The slowdown was predictable, predicted, unavoidable," Lagarde was quoted as saying.

"We expect that China will have a growth rate of 6.8 percent. It may be a little less." The IMF did not believe growth would fall to 4 or 4.5 percent, as some foresaw.

Noting that a drop in commodity prices had hit many emerging markets, she said those economies were "at the center of our attention."