Here's a loosely edited transcript of CNBC's interview with IMF Managing Director Christine Lagarde:
Q: Can I just clarify what we've heard today first. There's going to be no extension to the proposals on the table, so after Tuesday, effectively they die. So Alexis Tsipras has three days here to u-turn?
A: First of all, I would to remind everybody that Greece is under a program with the IMF until March 2016. So what has been discussed today are the European financial arrangements which are due to expire after a previous extension on June 30th. And of course everything is going to depend on the developments in the next few days. But as far as we are concerned, Greece is a member of the euro zone. When they are prepared to talk, and to continue negotiations, we stand ready to do that. we have constantly in the last few days showed a lot of willingness to progress, flexibility in what they can adjust to. And we stand ready to continue to doing that.
Q: Are you willing to provide even more flexibility though even from today, because they are saying already, they are going to meet an ultimatum with an ultimatum of their own. Which is effectively what they're saying that they've done.
A: You know, this ultimatum discussion is a bit over the top because there has been a preliminary position, successive iteration, modifications, movements, and so on and so forth… so I think there has been a lot of progress and we are a point where it has been significantly diluted compared with the previous arrangements. Just to give you an example, the fiscal targets have been significantly reduced. The structural reforms that are so necessary for the Greek economy to transform itself have been reduced as well, focusing on the principle ones… the ones that are more adjusted to the political and economic new situation in Greece. At the same time, we have always advocated a balanced deal. It has to include all the necessary reforms, growth friendly fiscal consolidation on the part of Greece. But also on the other side, a contribution to the financing in the next few months. And assurance, going forward, that they will be sustainable debt… which means most likely, a debt operation. And it's really that sort of balanced approached that needs to happen.
Q: Has your stance been made harder because of euro zone leaders won't agree to looking at further debt re-profiling or debt negotiation at this point?
A: This issue of financing and debt has always been in the background of anything… because we always have to issue debt sustainability analysis.
Q: If we don't see further negotiation from the Greeks, would you agree that a route down towards Grexit would look pretty inevitable here?
A: Let's hope it can be avoided. But clearly the outcome and the way in which the referendum… tonight or tomorrow, in the course of the day will happen… will be critical. As I said, if and when the Greek authorities are ready to resume talks, we certainly stand ready to help.
Q: There's confusion over what they can hold a referendum on now—because the programs, the proposals don't exist after Tuesday. Is that right? Because then it effectively becomes a euro membership referendum?
A: It is a fact that European financial arrangement runs until June 30. And that any development… unless there is a new arrangement, or an extension, will no longer legally exist.
Q: There are reports of panic, of people taking money out of ATMs already… of ATMs being empty particularly around the center of Athens. Do you think capital controls, or at least a bank holiday until this proposed referendum is necessary at this stage?
A: This is a matter which should be discussed between the Greek authorities and the European Central Bank. It's not for us to make decisions in that respect. And I'm sure they will be holding talks to address the situation and I'm sure they have the tools to respond.
Q: We shouldn't under estimate the dangers of these next few days?
A: Any moment of negotiations break up and eventually resumption afterwards are always difficult. And it is a difficult moment for sure.
Q: Many finance ministers have taken great effort to point out in the last few days, coming into these Eurogroup meetings that there won't be a contagion effect. That financially, countries will be protected. What about economic, political contagion at this stage. Are you concerned about the reaction in the financial markets when they re-open tomorrow night and on Monday?
A: You know, I have been around for a long time during those moments of crisis. And certainly the euro area is in a completely different position from where it was back in 2011. Let alone 2008. Whether it's the ESM, the ESFS - the tool box available and validated and endorsed by the court… the European Court of Justice in particular… by the ECB… and the tools and defenses that can be put to good use which were not available in 2011. So that issue of contagion has a completely different dimension. As far as the neighboring countries are concerned, clearly, there has been a debate. There has been precautions taken in vicinity countries.
Q: So you are far less concerned than you were?
A: In 2011? As I said the situation is entirely different. We are in a different paradigm for the euro area.
Q: Are you expecting to get paid, the money, on Tuesday?
A: Well, I certainly hope that the bundled payment due to the IMF on Tuesday night, at the latest, will be paid. If they were not paid on Tuesday night, then there is a series of procedures and notifications that I have to initiate. But technically, any country that does not pay on due date is in payment arrears vis-à-vis the Fund. And the consequences are that the Fund cannot disburse vis-à-vis that country until the arrears has been paid. Greece remains a member of the IMF. Greece benefits and alternate seat on the Board… and has access to technical assistance, receives surveyance and services but it cannot receive any payment until arrears has been paid.