European Union

Lagarde dismisses claim that Greece is being pushed to default

Jim Brunsden and Kerin Hope
Christine Lagarde
Yuri Gripas | Reuters

Christine Lagarde, head of the International Monetary Fund, has hit back at Greece over claims that the IMF is seeking to push the country towards default, describing the idea as "nonsense".

In a terse letter to Alexis Tsipras, Greek prime minister, Ms Lagarde defended IMF staff who have found themselves at the centre of a furore over a leaked transcript of a teleconference where they discuss difficult bailout negotiations.

Mr Tsipras has argued the leaked transcript of the mid-March call, which was published by WikiLeaks, raised the question of whether Athens can continue to deal with two officials on the call, Poul Thomsen, head of the IMF's European bureau, and Delia Valculescu, who oversees the Greek programme for the IMF. But Ms Lagarde said her team "consists of experienced staff who have my full confidence and personal backing".

Ms Lagarde falls short of accusing Athens of being responsible for spying on her officials, but she warns Mr Tsipras that "it is critical that your authorities ensure an environment that respects the privacy of their internal discussions".

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The row was prompted by comments recorded in the transcript where the IMF officials express frustration about the EU's slow progress in granting debt relief to Greece. They mention that eurozone governments have in the past left important decisions until the Greek government was on the point of bankruptcy.

Greece has publicly interpreted the remarks as a plan by the IMF to prolong negotiations on whether to take part in eurozone's latest bailout of the country until July, when the Greek government is faced with its next big debt payment. The logic would be that the impending deadline would give the IMF more leverage, allowing it to extract concessions out of a reluctant Germany on the debt relief that the IMF believes is essential for Greece's long-term recovery.

The episode prompted an emergency meeting of senior Greek ministers on Saturday, and led Mr Tsipras to write to Ms Lagarde the same day to express his "deep concerns". In his letter, he says that what is at stake is nothing less than "whether Greece can trust, and continue negotiating in good faith" with the IMF.

Ms Lagarde, in her reply, warns that the Greek reaction to the transcript has itself damaged mutual trust.

"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," she writes. "On reflection, however, I have decided to allow our team to return to Athens to continue the discussions."

Migrants and refugees gather around a bonfire as they wait to enter a refugee camp after crossing the Greek-Macedonian border.
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In a further swipe at Greece's handling of the affair, Ms Lagarde writes that the IMF "conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks."

Despite the competing interpretations over the transcript of the teleconference, it remains the clearest sign to date that the fund wants to leave Greece's €86bn rescue to the EU alone and wash its hands of a programme that has led to a torrent of criticism.

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Lagarde dismisses claim that Greece is being pushed to default

According to the document, Mr Thomsen at one point suggested confronting Angela Merkel, German chancellor, to either agree to debt relief or allow the IMF to exit.

Ms Lagarde confirms in the letter that, in her view, Greece is "still a good distance away from having a coherent program that I can present to our executive board."

"The real fight here is between Germany and the IMF; Greece is a mere spectator," said Mujtaba Rahman who heads European analysis at Eurasia Group. "As no IMF means no more bailout, Germany will ultimately support debt relief, it really has no other choice."

Several observers in Athens said they suspected the Syriza government could be behind the leak of the transcript.

"The government's reaction suggests it's trying to manufacture a crisis to make the fund pull out of the Greek programme, hoping to make a deal on easier terms with the EU," said Miranda Xafa, a researcher with the Centre for International Governance Innovation.