Lagarde: Debt relief for Greece as important as pension reform

5 February 2016
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As the first phase of talks between Greece and its creditors draws to an end, International Monetary Fund chief Christine Lagarde on Friday stressed that debt relief is as important for Greece as the reforms that creditors are demanding, notably of the pension system.

“I have always said that the Greek program has to walk on two legs: one is significant reforms and one is debt relief. If the pension [system] cannot be as significantly and substantially reformed as needed, we could need more debt relief on the other side.”

She noted, however that Greece’s pension system must become sustainable irrespective of any debt relief that creditors may decide to provide. Plowing 10 percent of gross domestic product into financing the pension system, compared to an average of 2.5 percent in the EU, is not sustainable, she said. She called for “short-term measures that will make it sustainable in the long term.”

As for criticism of the IMF as excessively harsh, Lagarde suggested it was unfair. “I really don’t like it when we are portrayed as the “draconian, rigorous terrible IMF.” “We do not want draconian fiscal measures to apply to Greece, which has already made a lot of sacrifices. We have said that fiscal consolidation should not be excessive, so that the economy could work and eventually expand. But it needs to add up.”

Apart from pension reform, Lagarde underlined the need for Greece to improve tax collection “so that revenue comes in and evasion is stopped.”

“And the debt relief by the other Europeans must accompany that process. We will be very attentive to the sustainability of the reforms, to the fact that it needs to add up, and to walk on two legs. That will be our compass for Greece. But we want that country to succeed at the end of the day, but it has to succeed in real life, not on paper.”

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