FRANCE 24: Greece could exit eurozone, IMF chief tells FRANCE 24

http://www.france24.com/en/20120515-greece-orderly-exit-eurozone-imf-chief-tells-france-24-christine-lagarde

International Monetary Fund chief Christine Lagarde told FRANCE 24 on Tuesday that even an "orderly" Greek exit from the eurozone would pose great risks but remains an option if the country's "budgetary commitments are not honoured".

Greece could leave the eurozone in an “orderly exit”, the head of the International Monetary Fund, Christine Lagarde, told FRANCE 24 on Tuesday.

In an exclusive interview, Lagarde raised the possibility that the debt-laden nation could quit the eurozone if it failed to meet the terms of a bailout deal negotiated with its EU partners and the IMF.

“If the country’s budgetary commitments are not honoured, there needs to be appropriate revisions, which means either supplementary financing and additional time, or mechanisms for an exit, which in this case must be orderly,” the IMF chief said.

Lagarde conceded that Greece's exit from the single currency, which had until recently seemed implausible, would come at a severe cost.

“It is something that would be extremely expensive and would pose great risks, but it is part of the options that we must technically consider,” she said.

Election rerun

Her interview followed another day of desperate attempts to form a coalition government in Greece, which has been without a government since inconclusive parliamentary elections on May 6.

On Tuesday a spokesman for President Karolos Papoulias admitted that days of wrangling between political leaders had failed to produce a viable coalition government.

Socialist leader Evangelos Venizelos, who negotiated Greece’s rescue package in his former role as finance minister, admitted the country would be forced to hold a rerun of parliamentary elections in the hope of finding a solution.

“We are going again towards elections, in a few days, under very bad conditions,” he said.

If the country goes to a second vote, expected on June 17, polls suggest the far-left Syriza party will dominate the election.

Syriza, who surprised everyone by taking second place in the May 6 elections, ahead of the Socialists, is opposed to the €130 billion bailout package that has forced the government to make severe spending cuts and the population to accept losses in pensions and wages.

‘A shame for the Greek people’

Lagarde told FRANCE 24 the people of Greece were being failed by the country’s politicians.

“They have undertaken important reforms, they have made a certain number of sacrifices,” she said. “To throw all this away because of profound political disagreements, it’s really a shame for the Greek people.”

Lagarde said the IMF would be ready to examine any “compromise solution” concerning Greece’s commitments, though she warned that such a compromise could only concern “details” of the bailout deal and not its “fundamentals”.

Even as she spoke, financial markets tumbled amid fears a Greek exit from the eurozone could spread to bigger struggling economies such as Spain and Italy.

Anticipating the chaos, Lagarde’s successor as head of the French finance ministry, François Baroin, warned that France would be presented with a €50 billion bill if Greece were forced to quit the eurozone.

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