Feb. 9 (Bloomberg) -- The International Monetary Fund defended its approach in negotiating the terms of a new loan to Greece, saying it’s not forcing the country to take steps such as budget cuts.
“The IMF is not imposing austerity on Greece,” IMF spokesman Gerry Rice told reporters in Washington today. “What we’re trying to do here is come up with a program that will return Greece to a sustainable path.”
Greek political leaders today struck a deal on a package of austerity measures, clearing the way for a swap to cut the nation’s debt and win its second rescue in two years. The accord came less than four hours before euro-region finance ministers hold an emergency meeting in Brussels to discuss the 130 billion-euro ($172 billion) lifeline and the swap that will impose a loss of about 70 percent for investors.
The political agreement was announced to IMF Managing Director Christine Lagarde by Prime Minister Lucas Papademos and is “an important initial step,” Rice said. Discussions on Greece will now continue at the Brussels meeting, which Lagarde is attending, he said. He declined to say what share of the new loan package the IMF is ready to finance because the extent of the country’s need isn’t yet clear.
The new package should address Greece’s major challenges, including debt and fiscal issues as well as competitiveness, Rice said. A “major element” is also transforming the labor market, he said.
“We’re well aware how difficult that’s going to be,” he said. “We’ve been trying to be mindful of the hardship facing the Greek people,” Rice said, adding the IMF wants to “minimize the impact on the most vulnerable in particular.”
The economic outlook for the Mediterranean economy depends on the program of measures attached to the loan and how they would be implemented, Rice said.
He also said technical discussions are continuing for a possible loan to Egypt after “productive discussions” last month. No meeting took place during a recent visit of an Egyptian military delegation in Washington, he said.
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