(Updates with Lagarde, Schaeuble, de Guindos comments)
* Germany gives no ground on question of Greece
* IMF's Lagarde makes case for flexibility to meet budgettargets
* De Guindos says no political resistance to aid for Spain * Mixed reviews on IMF call for slower budget cuts By Antoni Slodkowski and Julien Toyer
TOKYO, Oct 12 (Reuters) - Germany held firm on Friday ininsisting it was too soon to say Greece deserved more time tomeet its budget-cutting goals even as the head of the IMF laidout the case for leniency.
Greece, Spain and the euro zone's slow progress toward debtreform was centre stage at International Monetary Fund meetingsdespite Europe's best effort to step out of the spotlight.
IMF Managing Director Christine Lagarde, sitting next toGermany's finance minister, said Athens needed more breathingspace. "Given the... lack of growth, given the market pressure,given the efforts that have been undertaken, a bit more time isnecessary," she said, amplifying on remarks made on Thursday.
In a softening of earlier advice, the IMF has argued thatforcing Greece and other debt-burdened countries in Europe toreduce their deficits too quickly is counter-productive becauseit hurts the economy.
The shift was welcomed by some emerging market countries aswell as long-time critics who say that the tough conditionsattached to IMF loans inflict undue economic pain and make itharder for countries to grow their way out of debt.
"We have been arguing for some time that single-minded anddraconian fiscal policies may be counterproductive and have atendency to backfire," said Brazilian Finance Minister GuidoMantega.
But Germany, Europe's largest creditor country and the keyto any lasting fiscal reforms, pushed back and said reversingcourse on promised deficit reductions would weaken credibility.
Finance Minister Wolfgang Schaeuble said Europe had madeplenty of crisis-fighting progress, echoing comments from otherEuropean officials who said there should be greater attentionpaid to U.S. fiscal troubles.
He criticised Lagarde for calling for flexibility evenbefore the "troika" of Athens's lenders -- the IMF, the EuropeanUnion and the European Central Bank -- wrap up a review of their130 billion euro bailout programme for Greece.
"Until we have the troika report, we must not speculate," hesaid.
Lagarde and Schaeuble shared the stage as part of a paneldiscussion, their first public joint appearance since the IMFhead surprised investors on Thursday by stating unequivocallythat Greece and Spain needed more time.
Spain's economy minister, Luis de Guindos, said there was"absolutely" no political resistance from within the euro zoneto a Spanish bailout request, an apparent reference to Germany.Spain is under pressure to seek a bailout as it struggles torein in central government spending.
U.S. officials have expressed support for giving Europeancountries extra time to deal with their debt.
CHANGE OF TUNE
The IMF's change of tune on the speed of budget cuts stemsfrom research it released this week showing that aggressivefiscal consolidation crimps growth more sharply than previouslythought.
It also reflects a desire by Lagarde, a former Frenchfinance minister, to demonstrate the IMF is willing to get toughwith Europe. Big emerging economies, who have helped top up theIMF's crisis-fighting coffers, had worried about the Fund'sindependence.
"Let us not delude ourselves: without growth, the future ofthe global economy is in jeopardy," she said.
"One lesson is clear from history: reducing public debt isincredibly difficult without growth. High debt, in turn, makesit harder to get growth," she said.
Nobel prize-winning economist Paul Krugman called the IMF'snew research, contained in its latest World Economic Outlook,"an extensively documented exercise in hand-wringing."
"Kudos to the Fund for having the courage to say this, whichmeans bucking some powerful players as well as admitting thatits own analysis was flawed," Krugman wrote on his blog.
While the IMF has advocated a slower approach to debtreduction, it urged swifter policy action, both in Europe andthe United States, to remove economic uncertainty and help liftanaemic global economic growth.
The IMF meetings officially started on a regal note, withJapan's crown prince in attendance. Lagarde followed with someblunt warnings for the Fund's 188 member countries that theywere losing momentum in reforming the global financial system, arunning message from the IMF in the buildup to the meeting.
She said it was not much safer than in 2008, when thecollapse of Lehman Brothers triggered a global meltdown.
In Europe, the IMF wants to see more progress towardpromised reforms that would create a tighter fiscal and bankingunion.
In the United States, the IMF has sounded the alarm over the"fiscal cliff" of automatic spending cuts and tax increases thattake effect early next year unless Congress acts. Withoutaction, the tightening could plunge the economy back intorecession, the IMF said.
"We need to move beyond the system that gave us the crisis -a financial sector where some, as the ancient Greeks might say,toyed with hubris and unleashed nemesis," she said.
The Fund lowered its global growth forecast this week forthe second time since April. Host Japan offered another reminderon Friday that its own economy was losing steam as thegovernment downgraded its forecast for a third straight month.
But many officials pointed out that the global economy isstill growing, and expressed confidence that Europe would find away out of its mess.
"In Europe, the decision-making process is slow andcumbersome. But it's always delivered in the end," saidPortuguese Finance Minister Vitor Gaspar.
(Reporting by Reuters IMF team; Writing by Emily Kaiser;Editing by Tim Ahmann and Neil Fullick)
Keywords: IMF ECONOMY/