BERLIN: Greece’s debt needs “significant” restructuring, but debt forgiveness by the country’s creditors is not necessary, IMF chief Christine Lagarde said Wednesday, appearing to soften the lender’s previous stance.
“Debt will have to be restructured appropriately,” the International Monetary Fund’s managing director told German television channel ARD after meeting Chancellor Angela Merkel in Berlin.
“At the present time no haircut is needed,” she said, referring to a financial market term for debt write-offs by creditors.
But she also called for Greece to implement deep reforms.
“We had asked the authorities to consider two categories of reforms, pensions reforms, income tax reforms,” she said.
“Those are the two key areas but there are many others that need to be conducted in order to improve the economic situation of Greece.”
Lagarde said she was now “much more confident” on the outlook for resolving the Greek debt crisis “after the progress made by the Greek authorities to come in the direction of the institutions to satisfy the requirements that we have”.
By dropping any insistence on outright debt relief, Lagarde seemed to be departing from the IMF’s previous stance, taking a major step towards the position of Germany which has ruled out debt forgiveness.
Greece’s eurozone and IMF lenders have been locked for months in a standoff over debt relief and budget targets.
Instead, Lagarde said Greek interest payments should be lightened and the maturity of outstanding debt lengthened, meaning Athens will have more time to pay it off.
Such “significant” easing of the burden would, however, only come at the end of the current bailout programme once Greece had delivered on reforms.
“The more reforms, the more progress, the more improvement of the economic situation, the less there will have to be in terms of debt restructuring,” she said.
Greece on Monday agreed to discuss new bailout reforms in a bid to break the deadlock.
But the IMF, which has stayed out of Greece’s huge 86-billion-euro ($91 billion) bailout agreed in 2015 until it gets more guarantees, said more work was needed.