EU-IMF feud erupts over Greek debt

 President of the Eurogroup Council Jean-Claude Juncker speaks with International Monetary Fund chief Christine Lagarde in October.

Story highlights

  • Eurozone finance ministers postponed agreement on Greece's long-delayed €31.3bn aid payment
  • Shows divisions between IMF and EU creditors over how fast Athens must reduce its debt
  • IMF: Greece must reduce its debt levels to 120 per cent of economic output by 2020
  • Juncker told a post-meeting press conference the target would be moved to 2022

Eurozone finance ministers last night postponed agreement on Greece's long-delayed €31.3bn aid payment for yet another week as divisions between the International Monetary Fund and EU creditors over how fast Athens must reduce its burgeoning debt levels burst into the open.

Christine Lagarde, the IMF chief, and Jean-Claude Juncker, chair of the eurogroup of finance ministers, publicly sparred over whether Greece must reduce its debt levels to 120 per cent of economic output by 2020, long viewed the target to get Athens back to a sustainable debt level.

An agreement between the IMF and eurozone governments is essential to releasing the bailout tranche since both creditors disburse financial assistance concurrently.

In a rare breach, Mr Juncker told a post-meeting press conference the target would be moved to 2022, prompting Ms Lagarde to insist the IMF was sticking to the original timeline. When Mr Juncker again insisted it would be moved -- "I'm not joking," he said -- Ms Lagarde appeared exasperated, rolling her eyes and shaking her head.

"In our view, the appropriate timetable is 120 per cent by 2020," Ms Lagarde said. "We clearly have different views." Officials will meet again November 20 in an effort to reach agreement, Mr Juncker said.

Rise of the Greek far-right

    Just Watched

    Rise of the Greek far-right

Rise of the Greek far-right 03:58
PLAY VIDEO
Eurozone crisis continues to take toll

    Just Watched

    Eurozone crisis continues to take toll

Eurozone crisis continues to take toll 01:35
PLAY VIDEO
Austerity anger fuels violence in Greece

    Just Watched

    Austerity anger fuels violence in Greece

Austerity anger fuels violence in Greece 01:52
PLAY VIDEO

Despite the delay, officials insisted Greece would not default on Thursday, when Athens must make a debt payment of about €5bn without the benefit of international aid.

Greece's ability to raise the money on its own has been cast into doubt after the European Central Bank refused to increase the amount of treasury bills it would accept as collateral from Greek banks seeking low-interest ECB loans. Without the ability to use treasury bills as collateral, Greek banks have little financial incentive to purchase them.

But Olli Rehn, the EU's top economic official, said even if the ECB did not raise the ceiling of treasury bills it would accept, Greek banks had improved their cash position enough that they were expected to purchase the debt anyway, getting over what Mr Rehn termed a "Greek fiscal cliff".

The Lagarde-Juncker spat was a public manifestation of a fight that has been simmering behind closed doors for months. The IMF has insisted the overhauled bailout plan include a credible debt reduction proposal, which may force eurozone countries to accept losses on bailout loans.

But European Commission officials believe the IMF is being overly pessimistic, arguing Greece can grow faster economically and should be given more leeway to meet debt targets.

According to senior officials, the IMF believes that without any relief, Greek debt will stand at nearly 150 per cent of gross domestic product by 2020, while the European Commission believes it will be just over 140 per cent. Without agreement on the baseline, officials cannot come up with a debt relief plan, which will involve both eurozone governments and the ECB giving up cash they had originally been owed by Greece.

If the target is moved to 2022, eurozone governments will have an easier time formulating a plan, since it likely will only involve cutting interest rates on bailout loans. Standing firm to 2020 may require write downs on those loans, something Germany and other creditor countries have refused to do.

"We started to discuss a certain number of avenues," Mr Juncker said. "My personal feeling is that [official write downs] will not be the one that will be privileged."

      Europe's financial crisis

    • German Chancellor Angela Merkel talks with Finance Minister Wolfgang Schaeuble during a session at the Bundestag (lower house of parliament) on June 25, 2013 in Berlin.

      German Finance Minister Wolfgang Schaeuble says the eurozone's problems are not solved, but "we are in a much better shape than we used to be some years ago."
    • IBIZA, SPAIN - AUGUST 21:  A man dives into the sea in Cala Salada beach on August 21, 2013 in Ibiza, Spain. The small island of Ibiza lies within the Balearics islands, off the coast of Spain. For many years Ibiza has had a reputation as a party destination. Each year thousands of young people gather to enjoy not only the hot weather and the beaches but also the array of clubs with international DJ's playing to vast audiences. Ibiza has also gained a reputation for drugs and concerns are now growing that the taking and trafficking of drugs is spiralling out of control.  (Photo by David Ramos/Getty Images)

      Summer could not have come soon enough for Lloret de Mar, a tourist resort north of Barcelona. Despite the country's troubles, it's partying.
    • The Euro logo is seen in front of the European Central bank ECB prior to the press conference following the meeting of the Governing Council in Frankfurt/Main, Germany, on April 4, 2013.

      The global recovery has two speeds: That of the stimulus-fed U.S. and that of the austerity-starved eurozone, according to a new report.
    • The flags of the countries which make up the European Union, outside the European Parliament in Strasbourg, France.

      The "rich man's club" of Europe faces economic decay as it struggles to absorb Europe's "poor people", according to economic experts.
    • Packed beaches and Brit pubs? Not necessarily. Here's what drew travelers to one of Spain's most beautiful regions in the first place

      Spain's economic crisis is in its sixth straight year yet tourism, worth 11% of GDP, is holding its own, one of the few bright spots on a bleak horizon.
    • Photographer TTeixeira captured these images from a May Day protest in Porto, Portugal, Wednesday by demonstrators angered by economic austerity measures. "People protested with great order, but showed discontent against the government who they blame for this economic crisis," she said. "They want the government to resign and the Troika [European Commission, International Monetary Fund and European Central Bank] out of this country."

      As European financial markets close for the spring celebration of May Day, protesters across Europe and beyond have taken to the streets to demonstrate.
    • Croatian Prime Minister Zoran Milanovic delivers a speech in Mostar, on April 9, 2013. Prime Ministers from Bosnia's neighboring countries arrived in Bosnia with their delegations to attend the opening ceremony of "Mostar 2013 Trade Fair".

      As Croatia prepares to enter the 27-nation European Union, the country's Prime Minister says Italy must return to being the "powerhouse of Europe."
    • Anti-eviction activists and members of the Platform for Mortgage Victims (PAH) take part in a protest against the government's eviction laws in front of the Popular Party (PP) headquarters in Mallorca on April 23, 2013.

      Spain's unemployment rate rose to a record high of 27.2% in the first quarter of 2013, the Spanish National Institute of Statistics said Thursday.
    • People protest against the Spanish laws on house evictions outside the Spanish parliament on February 12, 2013 in Madrid, Spain.

      Spain has seen hundreds of protests since the "Indignados" movement erupted in 2011, marches and sit-ins are now common sights in the capital.