Tuesday, November 13, 2012

EU-IMF feud erupts over Greek debt

Eurozone finance ministers on Monday postponed agreement on Greece’s long-delayed €31.3bn aid payment for yet another week as divisions between the International Monetary Fund and EU creditors over how fast Athens must reduce its burgeoning debt levels burst into the open.
Christine Lagarde, the IMF chief, and Jean-Claude Juncker, chair of the eurogroup of finance ministers, publicly sparred over whether Greece must reduce its debt levels to 120 per cent of economic output by 2020, long viewed the target to get Athens back to a sustainable debt level.
An agreement between the IMF and eurozone governments is essential to releasing the bailout tranche since both creditors disburse financial assistance concurrently.
In a rare breach, Mr Juncker told a post-meeting press conference the target would be moved to 2022, prompting Ms Lagarde to insist the IMF was sticking to the original timeline. When Mr Juncker again insisted it would be moved – “I’m not joking,” he said – Ms Lagarde appeared exasperated, rolling her eyes and shaking her head.
“In our view, the appropriate timetable is 120 per cent by 2020,” Ms Lagarde said. “We clearly have different views.” Officials will meet again November 20 in an effort to reach agreement, Mr Juncker said.
Despite the delay, officials insisted Greece would not default on Friday, when Athens must make a debt payment of about €5bn without the benefit of international aid.
Greece’s ability to raise the money on its own has been cast into doubt after the European Central Bank refused to increase the amount of treasury bills it would accept as collateral from Greek banks seeking low-interest ECB loans. Without the ability to use treasury bills as collateral, Greek banks have little financial incentive to purchase them.

Read more: http://www.ft.com/intl/cms/s/0/2f1e8b0e-2d21-11e2-beb2-00144feabdc0.html#axzz2C7TA7TNg

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