A conflict between the International Monetary Fund and European Union erupted into the open on Monday night after Christine Lagarde publicly clashed with eurozone finance ministers over a critical target for reducing Greek debt levels.Jean-Claude Juncker, president of the Eurogroup of finance ministers, announced Greece would be given an extra two years to meet its debt reduction target of 120pc of GDP by 2022 instead of 2020.
“The target, as far as the time-frame is concerned, has been postponed to 2022,” he said.
A visibly angered Mrs Lagarde, the managing director of the IMF, shook her head and rolled her eyes at the announcement that breaches the Washington-based fund’s condition that Greek debt must become sustainable by 2020.
“We clearly have different views,” she said. “In our view the appropriate target is 120pc by 2020. It is critical that the Greek debt be sustainable.”
The 2020 “debt sustainability” target was agreed as the condition for the IMF’s involvement in the second Greek bail-out agreed in March this year and an EU decision to breach it could jeopardise the whole international package.
Amid the public disagreement, Mr Juncker admitted that finance ministers would have to meet again on November 20 to agree the final details on debt reduction and financing of Greek debt before paying €31.5bn in the next tranche of aid to Greece.
The Greek government will need a further €32.6bn (£26bn) of international aid if its austerity programme is relaxed by two years, according to an as-yet- unfinished EU-IMF troika report on Greece.
A draft of the long-delayed troika report on Greece said Athens would need €15bn of funding for 2013-14 and then another €17.6bn in 2015-16. The troika creditors – the European Union, European Central Bank and International Monetary Fund – had estimated just €8bn of extra funding.
Athens, which was expecting the release of the vital aid having finally pushed through its 2013 budget at a nail-biting vote on Sunday night, was instead plunged deeper into uncertainty and confusion.
Just four days before Athens could default, Olli Rehn, the EU’s economic and monetary affairs commissioner, insisted that Greece “will be able to roll over T-bills” to fund the government.
Kathleen Brooks of Forex.com said: “These bail-outs are becoming a bit like bottomless pits for the creditor nations of the currency bloc. After two and half years, Greece remains a problem and it is hard to see the eurozone remaining patient with Greece when its problems seem never-ending.”
Meanwhile, Istat said Italian youth unemployment leapt to a 24-year high at 35.1pc. There were violent protests in Naples where the German labour minister met his Italian counterpart.
Mario Monti, Italy’s premier, caused alarm when he said he was “not against a wealth tax” to try to raise funds for the country. “I’m not against a wealth tax but it will depend on how it works and how it will be used – either as a fiscal instrument or a one-off measure,” he said. “I don’t want this to be considered too dramatic [though]. Wealth taxes exist in some extremely capitalist countries.”
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