The Sunday Mail
Christine Lagarde
INTERNATIONAL Monetary Fund chief Christine Lagarde reminded European leaders that they may still need to give more help to Greece as Angela Merkel confronted German lawmakers who say the aid effort has already gone too far.
The agreement to negotiate a bailout programme worth as much as 86 billion euros ($94 billion) over three years won’t be enough to keep the euro region together unless Greece’s creditors also lower the country’s debt burden to boost its growth prospects, Lagarde said on Friday.
With Greece negotiating the parliamentary obstacles to a third rescue and the euro area ready to release bridge funding to keep the country afloat during talks, Lagarde is turning her focus back to the empty half of the glass.
On Monday, she welcomed the deal for averting Greece’s exit from the euro; now she’s pointing out that it won’t work.
Lagarde was asked in an interview on France’s Europe1 radio station whether the accord is viable without the debt restructuring that hard liners like Germany, Finland and the Netherlands are resisting.
“The answer is quite categorically not,” she said.
European leaders are struggling to find a formula to let Greece recover within the euro area that they can also sell to their own voters. Merkel, the German chancellor, will face growing dissent from within her party when the German parliament debates the Greek deal, while Finland’s Prime Minister Juha Sipila on Thursday dismissed talk of debt reduction as “useless”.
German Vote
German lawmakers interrupted their summer recess to return to Berlin for a three-hour floor debate. Finland’s parliament gave its approval on Thursday.
While Merkel’s majority in parliament suggests that passage is assured, 48 members of her 310-strong caucus have indicated they would break ranks and vote against the government line, a party official said. That compares with 29 who dissented in February on a vote to extend Greece’s second bailout.
“Pure and simple debt reductions seem apparently ruled out.”
“The systemic importance of Greece for the entire euro zone hasn’t been demonstrated,” Christian von Stetten, a member of Merkel’s Christian Democratic Union, said on Thursday. “There can only be one vote tomorrow, and that is no.”
The IMF this week estimated that Greece’s debt will peak at close to 200 percent of gross domestic product in the next two years. It’s not clear how much relief Greece needs, Lagarde said.
IMF Rules
“We’ve not been working with Greek teams for more than six months,” she said.
“We have no information especially on the situation of the financial sector.”
Greece missed a payment to the IMF of about 1,5 billion euros on June 30 after failing to meet the euro area’s conditions for accessing more funding in time.
A Greek central bank official said they aim to open the banks again on Monday but they aren’t sure that will be possible even after the European Central Bank agreed to increase their level of emergency funding by 900 million euros on Thursday.
The funds, provided by the Greek central bank with the ECB’s approval, had been capped since late June, when political talks on a bailout appeared to be collapsing.
Economic reforms and a healthy budget, allied to financing and debt restructuring from creditors, are needed for the IMF to take part in any further bailout for Greece, Lagarde said.
The founding fathers of the European project wanted an “ever-closer” union. Mario Draghi says the immediate goal should be one that’s less imperfect.
Attempting to move forward after the political squabbles that almost — again — ended with a rupture in the euro area over Greece, the European Central Bank president is making a plea for deeper regional cooperation. The trouble is, the renewed bout of turmoil has done nothing to encourage countries to travel that path.
Draghi and the European Union’s top bureaucrats want to overcome the contradictions of 19 sovereign countries using one currency and rejig the bloc to rule out recurring debt crises.
Speaking in Frankfurt on Thursday, he cited a report he co-authored with the four other “presidents” of the EU to say nations must move toward fiscal and political union.
“This union is imperfect, is fragile, is vulnerable, and doesn’t deliver — at the very least doesn’t deliver all the benefits it could if it were to be completed,” Draghi told reporters after the ECB approved measures to help ensure the survival of the Greek banking system.
“The future now should see decisive steps on further integration.”
Draghi, European Commission President Jean-Claude Juncker, EU President Donald Tusk, European Parliament President Martin Schulz and Eurogroup President Jeroen Dijsselbloem, laid out a potential map for stronger European integration in the so-called “Five Presidents” report published last month.
The document laid out the possibility of a shared treasury for the region within 10 years. That meshes with the opening lines of the 1957 Treaty of Rome, which envisaged an “an ever closer union” which would “eliminate the barriers which divide Europe.” — Bloomberg.
