IMF, European Union Publicly Brawl On Conditions For Greek Aid, Sowing Uncertainty

on November 14 2012 6:55 AM
Luxembourg Finance Minister Juncker, Spain Finance Minister De Guindos and IMF Managing Director Lagarde on Monday.
Luxembourg Finance Minister Jean-Claude Juncker, Spain Finance Minister Luis De Guindos and IMF Managing Director Christine Lagarde, from left, on Monday Reuters

A sharp exchange between top European Union and International Monetary Fund officials Monday night bared a rare public rift between those institutions’ approaches to the endless euro zone financial crisis, stoking fears that a moment of reckoning for the Continent could be due.

In an unsettling break with decorum, Jean-Claude Juncker, the president of the Eurogroup of finance ministers, publicly clashed with IMF Managing Director Christine Lagarde over whether Greece would be granted two more years to meet debt reduction targets of 120 percent of GDP.

The expectation in Athens and Brussels, where most European Union bureaucracies are run, had been that the IMF, as well as the Frankfurt-based European Central Bank, would recognize recent efforts by the Greek government to impose painful austerity measures by continuing to provide financing, even if that meant ignoring previously imposed targets.

“The target, as far as the time frame is concerned, has been postponed to 2022,” Juncker said at a press conference.

But apparently, that point had not been cleared with the IMF, as Lagarde, who was present, shook her head and rolled her eyes at Juncker.

“We clearly have different views,” she said. “In our view the appropriate target is 120 percent by 2020. It is critical that the Greek debt be sustainable."

Beyond the public schism, Juncker added tension to the situation by announcing that the finance ministers would have to meet again Nov. 20 to hammer out the details of the extension and to work out how to provide Greece with an additional bailout.

The Greek government will need a further €32.6 billion of financing to stay afloat in the next four years, according to a draft report by the "troika" -- the European Union, ECB and IMF.

It is not known if the IMF will balk at providing some of that extra aid, given Lagarde’s position Monday.

While she said the IMF will “play its part” in supporting Greece, she warned that “we are in not for a quick fix but a real fix.”

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