Lagarde said that Greece’s debt needed “significant” restructuring but that it did not require debt forgiveness, marking an apparent shift of her policy view.
Speaking in a German television interview after meeting Chancellor Angela Merkel in Berlin, Ms Lagarde said “the volume of restructuring will clearly depend on how much reform, how much progress, how strong the Greek economy is” when the aid programme ends.
Lagarde signalled that Greek debt restructuring can wait and the country should focus on overhauling its economy for the duration of its latest bailout, which expires in 2018.
Germany and other eurozone lenders have categorically dismissed the notion of debt forgiveness, previously placing it at loggerheads with the global financial mechanism.
However, Lagarde told German broadcaster ARD that she was “much more confident” of Greece’s outlook for resolving the debt crisis.
“What will be needed is not a haircut if the reforms are done, but a significant extension of maturity, a significant interest rate capping, and that will have to be discussed in greater detail later on as progress is made on the reform front,” Lagarde said.
“We had asked the authorities to consider two categories of reforms, pensions reforms, income tax reforms,” Lagarde said. “Those are the two key areas but there are many others that need to be conducted in order to improve the economic situation of Greece.”
While the IMF has not granted Greece loans since 2013, the mechanism’s participation is considered crucial by the German federal government and other European lenders.
In 2015, eurozone members approved an additional 86-billion-euro bailout package, but the IMF did not sign onto the deal, saying it needed guarantees about debt sustainability.
