The euro area and the International Monetary Fund will be able to work out a disagreement over the timeline for reducing Greece’s debt load, Luxembourg Prime Minister Jean-Claude Juncker said after the discord helped push the euro down for a fifth day.
“I am confident that the IMF will stay on board” with Greece’s aid program, Juncker said today in an interview in Hingene, Belgium. The IMF has contributed about one-third of 148.6 billion euros ($189 billion) in loans to Greece since 2010.
While euro-area finance chiefs at a meeting yesterday pushed back the goal of getting Greece’s debt down to a “sustainable” level of 120 percent of economic output by two years until 2022, IMF Managing Director Christine Lagarde said the timetable “has to be 2020.”
Juncker, who leads the group of euro-area finance ministers, said all agreed that Greece’s debt level must be “sustainable,” adding that talks on the next steps for the nation are continuing.
“The IMF is within its rights to be asking Europeans to bring the necessary attention to the debt-reduction problem,” Juncker said. “Some of us believe that this 120 percent level could be postponed to the year 2022,” he said, adding that “there’s no real dispute with the IMF.”
The discord helped push the euro to a two-month low against the dollar before the currency rebounded from its lows after German newspaper Bild-Zeitung reported that Germany favored combining aid payments for Greece into a single package. The euro traded at $1.2701 at 1:45 p.m. in Brussels, down less than 0.1 percent on the day after trading as low as $1.2662 earlier.
“It appears that the biggest issue that needs to be resolved is what role the IMF will play in the program,” said Dermot O’Leary, chief economist at Dublin-based Goodbody Stockbrokers. The IMF’s Lagarde “is clearly pushing for debt reduction to be part of the next program for Greece.”
The euro-area finance chiefs also gave Greece two extra years -- until 2016 -- to cut its budget deficit to 2 percent of gross domestic product. The ministers delayed until Nov. 20 a decision on how to cover additional Greek financing needs of as much as 32.6 billion euros ($41 billion).
“Greece has done a big part of what it was supposed to do, adopted an ambitious reform program and a budget for 2013 that’s impressive,” Juncker told reporters late yesterday in Brussels after leading the meeting of euro-area finance ministers.
“We have an ongoing debate on the adjustment calendar” for Greece’s finances, Juncker said today in Hingene.
“Debt sustainability of Greece has to be measured in 2020,” Lagarde said. “We clearly have different views. What matters at the end of the day is the sustainability of the Greek debt.”
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