International Monetary Fund Managing Director Christine Lagarde rebuffed Greek government calls to replace top fund officials overseeing the country’s bailout, and said the IMF is “a good distance away” from a plan that would allow for additional loans to Europe’s most indebted state.
Lagarde’s comments came in response to a letter from Greek Prime Minister Alexis Tsipras, questioning whether the nation can trust the IMF and continue negotiations in good faith. His concerns were based on a leaked report from Wikileaks in which IMF officials discussed the possibility of putting pressure on Germany to give Greece debt relief.
“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.”
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 agreed budget targets. Germany and other euro area countries have insisted that the Fund will eventually have to get on board for the bailout to proceed.
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.
“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 the interest of the Greek people, we need to bring these negotiations to a speedy conclusion.”
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.
“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,” said Nicholas Economides, a professor of economics at the New York University’s Stern School of Business. “The IMF has made it even more clear that it will not participate in the program without a debt reduction.”
Lagarde’s demand that the IMF be given privacy in Greece was “clearly accusing the Greek government of initiating the leak and invading the privacy of the IMF staff in Greece,” Economides said.
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