IMF Chief Urges Greece's Lenders to Focus on Debt Relief

International Monetary Fund Managing Director Christine Lagarde urged Greece's lenders to concentrate on debt relief instead of simply pushing for contingency budget cuts.

MOSCOW (Sputnik) — Greece's international lenders must focus on debt relief for the indebted country instead of simply pushing ahead with contingency budget cuts and structural reforms, International Monetary Fund (IMF) Managing Director Christine Lagarde said on Friday.

"I think it is time for me to clarify our position, and to explain the reasons why we believe that specific measures, debt restructuring, and financing must now be discussed simultaneously… It is essential that the financing and debt relief from Greece’s European partners are based on fiscal targets that are realistic because they are supported by credible measures to reach them," Lagarde said in a letter, obtained and published by the Financial Times newspaper, which was addressed to the finance ministers of Eurozone countries.

The letter comes ahead of Monday's extraordinary meeting of the 19 Eurozone finance ministers, known as the Eurogroup, to discuss "the state of play" of Greek policy reforms and public debt in order for the country to unlock further financial assistance. Last week’s Eurogroup session was canceled due to the lack of progress in talks. European lenders want Greece to adopt a package of contingency measures that will be enforced if Athens goes off track in its efforts to reach a primary budget surplus of at least 3.5 percent GDP.

In contrast to the Eurogroup's focus on contingency measures that involve narrow tax hikes and cuts to discretionary spending, Lagarde urged the ministers to also discuss debt relief for the beleaguered country.

The IMF chief also urged the Eurogroup to consider lowering its "unrealistic" target of 3.5 percent primary budget surplus, advocating a lower target of 1.5 percent, which would better correspond to the agreed 2.5 percent GDP budget cuts by 2018.

Greece signed a deal with its creditors, the International Monetary Fund (IMF) and the European Central Bank (ECB) alongside Eurozone nations, in July 2015 for a third bailout package worth 86 billion euros ($96 billion) in exchange for unpopular austerity reforms that include pension cuts and tax hikes.

Under two previous bailout programs, the last of which expired on June 30, 2015, Greece received about $270 billion from the IMF, the ECB and Eurozone countries. The aid also came in exchange for austerity measures.