Lagarde Says Greece Plans May Not Meet Benchmarks for IMFAndrew Mayeda
IMF Managing Director Christine Lagarde said Greece’s policy proposals fall short on key changes and may not meet the lender’s benchmarks for aid to continue.
Greece hasn’t given clear commitments for shifts on pensions and the value-added tax, and hasn’t been “unequivocal” on following through on agreed-upon policies such as privatization and labor-market changes, Lagarde said in a letter dated Monday to Dutch Finance Minister Jeroen Dijsselbloem, president of the Eurogroup of finance ministers. The International Monetary Fund released the letter on Tuesday.
“We consider such commitments and undertakings to be critical for Greece’s ability to meet the basic objectives of its Fund-supported program,” Lagarde said.
The comments suggest Greece has more work to do if it wants to continue receiving funds under the IMF’s portion of the country’s international aid. The letter was released after European finance ministers separately approved a bailout extension following the pledges by Prime Minister Alexis Tsipras’s government to revamp tax collection, consolidate pension funds and maintain sales of state-owned assets.
While the reforms proposed by Greece are comprehensive enough to serve as a “valid starting point” for discussion, the list is “not very specific” and doesn’t convey “clear assurances” that key reforms will be implemented, Lagarde wrote.
The IMF agreed to provide $33.6 billion in loans to Greece in 2012, of which $14.4 billion has been drawn down.
Greece and the euro area have been battling since 2010 over preserving the currency union and keeping the nation afloat. After two bailouts pledging 240 billion euros ($272 billion) and the biggest debt restructuring in history, Greece remains short of cash and cut off from financial markets, with the threat of wider contagion ever present.