IMF’s Chief Warns on Debt Talks



PARIS—International Monetary Fund chief Christine Lagarde said Greece’s public-sector creditors may have to take a hit on their loans if private lenders can’t agree on a restructuring plan that goes far enough to make the country’s debt sustainable.

Associated PressChristine Lagarde, Managing Director of the International Monetary Fund.

“The bigger the private effort, the smaller the participation of public creditors will need to be,” Ms. Lagarde said. “If the level demanded of private investors isn’t reached, then public creditors will have to step in too.”

Greece’s principal public creditors are the European Central Bank and euro-zone governments. After Ms. Lagarde’s remarks, the IMF said in a statement that it “has not asked the ECB to play any specific role.” The fund said it has “no view” on the relative combination of private- and public-sector contributions, but sees it as “essential” that any Greek deal brings the nation’s debt down to 120% of gross domestic product by 2020.

An ECB spokeswoman declined to comment. The ECB has opposed taking haircuts on its Greek bond holdings, and has repeatedly said that it won’t take part in any debt-restructuring talks and that it will hold its Greek bonds until they mature. Many ECB officials would likely view losses on their Greek holdings as a violation of the central bank’s founding treaty, which forbids it from financing governments.

Euro-zone officials are seeking to secure a deal for Greece and stop the sovereign-debt crisis from engulfing larger nations such as Italy. An agreement between private-sector lenders and the Greek government is a crucial part of that effort. Unless private creditors agree to take enough of a voluntary haircut on their holdings of Greek bonds, the IMF and the European Union have said they won’t channel more funds to the debt-laden country.

On Wednesday, a steering committee representing Greece’s private creditors met in Paris. The meeting, run by Institute of International Finance chief Charles Dallara and Jean Lemierre, a senior adviser to BNP Paribas SA, suggests lenders were regrouping to seek a way forward in talks with the Greek government after negotiations stalled last week. The meeting was “to take stock of the latest developments and to determine the course ahead,” said a person familiar with the matter.

The person said the “significant developments” in Brussels this week, referring to meetings of European finance ministers, as well as a summit of European Union leaders on Jan. 30, were raising the pressure to decide on the path for Greece.