Germany says no rift with IMF on austerity plan

TOKYO: Germany's Finance Minister Wolfgang Schaeuble on Saturday sought to quell speculation of a rift with the International Monetary Fund over austerity cuts for debt-riddled eurozone members.

On Thursday, IMF Managing Director Christine Lagarde said she was happy for Greece -- struggling under the weight of cuts demanded by international creditors -- to have two more years to meet its deficit-reduction targets.

The next day, Schaeuble said there was "no alternative" to cutting bloated national balance sheets, which Athens and other troubled eurozone nations have agreed to in exchange for multi-billion euro bailouts.

On Saturday, Schaeuble insisted there was no ideology gap.

"We are in complete agreement with the IMF, and especially with Ms Lagarde, that in a mid-term view the reduction of too-high debt levels is completely unavoidable," Schaeuble told a press briefing at the IMF's annual meeting in Tokyo.

"There is no disagreement about that at all; about the pace of the first steps and their size... but they must go in the right direction."

He added that his earlier comments were directed at Greece.

"(Greece) is another subject. I have not talked about the aid programme for Greece."

Greece, Spain and the euro zone's slow progress toward debt reform was centre stage at International Monetary Fund meetings despite Europe's best effort to step out of the spotlight.

Earlier, 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.

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.

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 inflict undue economic pain and 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.



But Germany, Europe's largest creditor country and the key to any lasting fiscal reforms, pushed back and said reversing course on promised deficit reductions would weaken credibility.

Finance Minister Wolfgang Schaeuble said Europe had made plenty of crisis-fighting progress, echoing comments from other European officials who said there should be greater attention paid to U.S. fiscal troubles.