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Lagarde: Greece’s problem is debt; pension, tax reforms needed

More pension and tax system reforms apparently remains the IMF’s “medicine” to cure bailout-dependent Greece, as the Fund’s managing director, Christine Lagarde, insisted on Monday.

Moreover, the powerful IMF chief said she disagrees with an equally influential policy-maker directly affecting the Greek program, German FinMin Wolfgang Schaeuble, saying Greece’s problem is not productivity but the debt.

In fact, those were her words, namely, that crisis-bedevilled Greece needs less debt. Speaking at a round-table discussion hosted by the American Enterprise Institute (AEI), the former French minister said Greece’s debt must become sustainable in order to boost production, while also stressing that pension and tax system reforms are necessary in order to support economic recovery and free up growth.

In reference to the IMF’s role in the current (third) bailout, she said the Fund will participate if implemented reforms create positive fiscal conditions and render the debt sustainable – an oft-repeated framework demanded by the IMF’s leadership.