The International Monetary Fund believes that the only way to reduce Greek debt to a sustainable level is by way of a debt haircut involving the country's government creditors. But with an election approaching, Germany has refused to consider the proposal. Reality is on the IMF's side.
An elegant appearance is important to Christine Lagarde. The head of the International Monetary Fund (IMF) wears her short hair carefully coiffed, and diamonds glitter on her manicured fingers. When she talks about global financial issues, she hardly ever raises her voice. Her colleagues at the Washington-based financial authority call her "Ms. Perfect."
But last Tuesday Lagarde, who was once French finance minister, was having trouble keeping her composure. She had hurried back to Europe from Asia to attend the latest in a series of Euro Group crisis meetings on Greece. And even though she had a fever and felt weak from the flu, she began to raise her voice as she spoke. For Greece to recover, she insisted, creditor countries would have to forgive the government in Athens a large share of its debt. "Nothing else will work," Lagarde said.
But the group, most notably Germany's impassive Foreign Minister Wolfgang Schäuble, from Chancellor Angela Merkel's Christian Democratic Union (CDU), refused to budge. The meeting ended unsuccessfully at around 5 a.m. and was adjourned until this Monday. ................(more)