Lagarde Says IMF Greek Deal Far Off as Talks Roiled by Leaks

  • Fund director says debt relief negotiations need to end soon
  • Greece must guarantee safety to IMF staff in Athens, she says

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International Monetary Fund Managing Director Christine Lagarde rebuffed Greek government calls to replace top officials overseeing the country’s bailout and said the IMF is “a good distance away” from an agreement that would allow for additional loans to Europe’s most indebted state.

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Lagarde’s comments came in response to a letter from Greek Prime Minister Alexis Tsipras, questioning whether the nation can trust some top IMF officials and continue negotiations with them in good faith. His concerns were based on a leaked conference call transcript published by WikiLeaks in which the officials were cited as discussing the possibility of putting pressure on Germany to give Greece debt relief.

The government in Athens said in an e-mail to reporters on Saturday that the leaks show that the Fund has been considering a plan to cause a credit event in Greece and destabilize Europe.

“Successful negotiations are built on mutual trust, and this weekend’s incident has made me concerned as to whether we can indeed achieve progress in a climate of extreme sensitivity to statements of either side,” Lagarde said in a letter to Tsipras released by the IMF on Sunday. “On reflection, however, I have decided to allow our team to return to Athens to continue the discussions.”

At Loggerheads

The IMF has been at loggerheads with auditors from the European Commission over the fiscal measures that the nation must implement in order to meet its budget targets and reduce its debt. Germany and other euro area countries have insisted that the Fund will eventually have to get on board for the bailout to proceed, while resisting IMF calls for a deeper Greek debt relief.

“The IMF leak confirms that the row among the creditors is the biggest obstacle to a quick conclusion of the on-going review,” of Greece’s bailout, Wolfango Piccoli, an analyst at Teneo Intelligence wrote in a note to clients Sunday.

In an unusually strongly-worded statement, Lagarde hinted that the Greek government spied on IMF officials and leaked the transcript of the internal call. It’s critical that Greece respects the privacy of the IMF’s internal discussions and ensures the personal safety of its staff, she said.

“The IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks,” Lagarde said. “Any speculation that IMF staff would consider using a credit event as a negotiating tactic is simply nonsense,” she said.

“Lagarde insists that the leak was not made by the IMF and demands that the IMF be given privacy in Greece, clearly accusing the Greek government of initiating the leak and invading the privacy of the IMF staff in Greece,” according to Nicholas Economides, a professor of economics at the New York University’s Stern School of Business.

Bailout Conditions

Officials from the IMF, the European Central Bank, the European Stability Mechanism, and the European Commission were scheduled to resume negotiations with the Greek government on Monday in Athens on the conditions attached to the country’s latest bailout.

“If it were necessary to lower the fiscal targets to have a realistic chance of them being fully met, there would be an attendant need for more debt relief,” Lagarde said in her letter. “In the interest of the Greek people, we need to bring these negotiations to a speedy conclusion.”

“The leak and the e-mail exchanges between Tsipras and Lagarde have strengthened the negotiating position of the IMF toward both Greece and the Europeans,” Economides said. “The IMF has made it even more clear that it will not participate in the program without a debt reduction.”

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