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Debate on Greece ignites new crisis fears

Reuters Brussels

A public clash between Greece’s international lenders over how Athens can bring its debts down to a sustainable level has reignited fears that the crisis may flare up anew.

Euro zone finance ministers suggested that Greece, where the euro zone debt crisis began, should be given until 2022 to lower its ratio of debt to gross domestic product (GDP) to 120 percent but International Monetary Fund (IMF) chief Christine Lagarde insisted the existing target of 2020 remain.

“We clearly have different views. What matters at the end of the day is the sustainability of Greek debt so that country can be back on its feet,” Lagarde said, in an unusually public airing of a disagreement that has rumbled for weeks behind closed doors.

Beneath her sharp exchange with Euro Group chairman Jean-Claude Juncker, lies a rift over whether euro zone governments need to write off some of Greece’s debt to them to make it manageable. IMF officials have pressed for such a “haircut” while Germany has vehemently rejected it as illegal.

German Finance Minister Wolfgang Schaeuble said yesterday that the 2020 deadline was “a little too ambitious. There’s a debate about a haircut… most countries have said so in the past few weeks that that’s legally not possible”.

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