Friday, October 12 15:40:29
Germany held firm today in insisting it was too soon to say Greece deserved more time to meet its deficit-cutting goals even as the head of the International Monetary Fund laid out the case for leniency.
Although Greece, Spain and the euro zone's slow progress toward debt reform was centre stage at International Monetary Fund meetings, there were some signs that Europe was edging forward in tackling the three-year old debt crisis.
The EU's top economic official for the first time indicated how possible aid for Spain could work and a European Central Bank policymaker endorsed a suggested extension of Greece's budget deadlines.
This week, in a softening of earlier advice, the IMF has argued that forcing Greece and other debt-burdened countries in Europe to reduce their deficits too quickly is counter-productive because it hurts the economy.
IMF Managing Director Christine Lagarde, sitting next to Germany's finance minister, said Athens needed more breathing space.
"Given the... lack of growth, given the market pressure, given the efforts that have been undertaken, a bit more time is necessary," she said, amplifying on remarks made on Thursday.
Any steps that would raise Athens' chances of succeeding were welcome, European Central Bank board member Benoit Coeure said. But he noted that a mooted two-year extension of Greece's budget balancing goal would come at a price of extra financing needs.
The shift was welcomed by some emerging market countries as well as long-time critics who say that the tough conditions attached to IMF loans make it harder for countries to grow their way out of debt.
"We have been arguing for some time that single-minded and draconian fiscal policies may be counterproductive and have a tendency to backfire," said Brazilian Finance Minister Guido Mantega.
In a sign that growth was a top concern, Canadian Finance Minister Jim Flaherty told reporters on a conference call that some finance ministers at the meetings had discussed the possibility of additional fiscal stimulus if Europe's economic travails worsened. He did not give any details. (C ) Reuters