The International Monetary Fund has dismissed reports that it is trying to push Greece towards default as “simply nonsense”.
“The IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks,” IMF chief Christine Lagarde wrote in a letter to Greek PM Alexis Tsipras.
Christine Lagarde’s letter comes after Wikileaks published a transcript of IMF officials discussing bailout negotiations.
One says a “crisis” could force a deal.
Greece publicly demanded an explanation after the leak, suggesting the comments meant the IMF could be planning to deliberately prolong debt negotiations until the country was close to running out of money.
Christine Lagarde said the “incident” had made her “concerned as to whether we can indeed achieve progress”, but said she had decided to allow the IMF team to return to Athens to continue debt discussions.
However, the IMF chief also warned that the latest bailout deal was “still a good distance away”.
Christine Lagarde said that the IMF could only support a deal that would enable “robust growth” for Greece, while also allowing it to tackle its debt repayments.
In 2015, Greece agreed a multi-billion dollar bailout with the EU and IMF that was needed for the country to avoid bankruptcy and stay in the eurozone.
Talks between Greece, the EU and the IMF on a bailout review, assessing Greece’s progress at implementing money-saving reforms and aimed at unlocking further loans, are due to resume this week.
The review has been suspended twice since January due to disagreement among the lenders over the estimated size of Greece’s fiscal gap by 2018, as well as different opinions on pension reforms and how bad loans are being managed.
“In the interest of the Greek people, we need to bring these negotiations to a speedy conclusion,” wrote Christine Lagarde.
IMF head Christine Lagarde is facing trial French trial for alleged negligence over a €404 million ($438 million) payment to businessman Bernard Tapie in 2008.
Christine Lagarde, 59, was finance minister in President Nicolas Sarkozy’s government at the time of the compensation award to Bernard Tapie for the sale of a company.
Bernard Tapie supported Nicolas Sarkozy in the 2007 presidential election.
Christine Lagarde’s lawyer described the court’s decision as “incomprehensible”, and said the IMF chief would appeal.
In a statement Christine Lagarde said she had “always acted in this affair in the interest of the state and in respect of the law”, AP reported.
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Bernard Tapie was once a majority shareholder in sports goods company Adidas but sold it in 1993 in order to become a cabinet minister in Francois Mitterrand’s Socialist government.
He sued the Credit Lyonnais bank over its handling of the sale, alleging that the partly state-owned bank had defrauded him by deliberately undervaluing the company.
Bernard Lagarde’s case was later referred by Christine Lagarde to a three-member arbitration panel which awarded the compensation, causing a public outcry.
Investigators suspect he was granted a deal in return for his support of Nicolas Sarkozy.
Earlier this month, a French court ruled that Bernard Tapie was not entitled to any compensation for that sale and should pay back the €404 million with interest.
France’s Court of Justice of the Republic (CJR) decided that Christine Lagarde should be tried on the charge of “negligence by a person in position of public authority” over the compensation case, iTele TV channel and the Mediapart website reported on December 17.
A court spokesman later confirmed the decision.
If convicted, Christine Lagarde could be sentenced to one year in prison.
French media said the CJR investigation magistrates declined to follow the recommendation of another court which last year decided not to pursue the case.
“I will recommend Mrs. Lagarde appeal against this decision.”
A spokesman for France’s attorney general said Christine Lagarde would have five days to appeal, once the court decision is made public on December 18 or December 21.
Meanwhile, IMF spokesman Gerry Rice said the organization – which represents 188 member nations – “continues to express its confidence in the managing director’s ability to effectively carry out her duties”.
Christine Lagarde replaced Dominique Strauss-Kahn as IMF managing director in 2011.
Dominique Strauss-Kahn – also a former French minister – resigned following his arrest in New York on charges of assault that were later dropped.
Stephane Richard, CEO of France Telecom-Orange, has been held in custody for questioning in Bernard Tapie corruption case.
Stephane Richard, who previously worked in the French Finance Ministry, was quizzed over his role in a 2008 payment made to the businessman Bernard Tapie.
The businessman denies any wrongdoing.
Christine Lagarde, the head of the International Monetary Fund (IMF), has also been called upon to testify in the case.
She was the French Finance Minister at the time in question while Stephane Richard was her chief of staff.
Stephane Richard, CEO of France Telecom-Orange, has been held in custody for questioning in Bernard Tapie corruption case
France Telecom-Orange said the questioning was expected and that Stephane Richard remained in charge. He can be held for up to 48 hours.
His contract at the partly state-owned company is up for renewal next year and the position is chosen by the government.
“The state in its role as a shareholder will take a position if needed at the right time on the continuing case,” Industry Minister Arnaud Montebourg said in a statement.
The Court of Justice of the Republic, which investigates ministerial misconduct in France, is looking into claims that Bernard Tapie may have received favorable treatment because of his support for the former President, Nicolas Sarkozy.
He received a payment of 400 million euros ($520 million) as part of a settlement in a long-running business dispute, which critics say was too generous.
After two days of questioning Christine Lagarde was made a key witness in the case – a status that means she is unlikely to be prosecuted.
Christine Lagarde has arrived at a court in Paris for questioning over a payout to controversial tycoon Bernard Tapie during her time as finance minister.
The IMF chief is being asked to explain her handling of a row in 2007 which resulted in some 400 million euros ($516 million) being paid to Bernard Tapie.
She is appearing before the Court of Justice of the Republic (CJR), which investigates ministerial misconduct.
Christine Lagarde insists the award was the best solution at the time.
“It’s a pleasure to see you,” a smiling she told reporters upon arrival.
Christine Lagarde could be placed under formal investigation for the decision to use arbitration, against advice from senior advisers, to settle a long-running court battle between the state and Bernard Tapie, a supporter of the then French President, Nicolas Sarkozy.
Christine Lagarde has arrived at a court in Paris for questioning over a payout to controversial tycoon Bernard Tapie during her time as finance minister
The case stretches back to 1993 when Bernard Tapie, a colorful, controversial character in the French business world, sold his stake in sports company Adidas to Credit Lyonnais.
Soon after the bank sold on that stake for a much bigger profit, Bernard Tapie claimed they had defrauded him.
In 2007, President Nicolas Sarkozy suggested the finance ministry – which had been overseeing the dispute and was led by Christine Lagarde – should move the case to arbitration.
Bernard Tapie won a much bigger payout than he might have expected in court.
Christine Lagarde is not accused of profiting from the payout, but she is being questioned over the misuse of public funds.
If she is placed under formal investigation it is of course embarrassing. It is a step closer to trial but it does not necessarily mean the case will end up in court.
Christine Lagarde is still one of the most popular politicians on the right in France. And after the disgrace that was heaped on the last IMF chief, Dominique Strauss-Kahn, few in France want to see another prominent French politician embarrassed on the world stage.
Some on the right wonder whether she could be a future candidate for first female French president, notably because she has stayed outside the conservative UMP party’s vicious in-fighting.
Christine Lagarde, a perfect English speaker, has never expressed a desire to run for president. But her five-year term at the IMF is due to finish in 2016 – a year before the next presidential election. With her acumen she may be a dangerous opponent for President Francois Hollande.
Cyprus has officially agreed to a set of measures that will release a 10 billion-euro ($12.8 billion) IMF-EU bailout.
The IMF, which is contributing 1 billion euros, says they are “challenging” and will require “great efforts” from its population.
The measures will consist of doubling taxes on interest income to 30% and raising corporation tax from 10% to 12.5%.
The plan, designed to stabilize Cyprus banking system and government finances, was agreed in principle last week.
Cyprus has agreed to a set of measures that will release a 10 bn-euro IMF-EU bailout
Cyprus’s new finance minister Harris Georgiades, speaking on his first day in the post, said he was determined to honor the country’s commitments: “The responsibility is great, and the expectations of our citizens greater. Our promise is that we will make every effort for what is best for the nation. Under your guidance I am sure we will succeed.”
Harris Georgiades appointment followed the resignation of Michalis Sarris on Tuesday.
The plans for the two largest banks, Bank of Cyprus and Laiki, are especially controversial, as they will involve heavy losses for depositors with large balances in their accounts.
The IMF, which is providing 10% of the bailout money, said 95% of account holders would be protected.
The majority of accounts have less than 100,000 euros in them, which will not be affected.
However, depositors with more than 100,000 euros will lose some of their savings. Although the exact amount has still not been decided, reports have said they could lose up to 60%.
Cyprus agreed last week to shut down Laiki and transfer deposits of under 100,000 euros to Bank of Cyprus.
The IMF’s managing director, Christine Lagarde, said Cyprus would need to pull together: “This is a challenging programme that will require great efforts from the Cypriot population.”
Christine Lagarde added that its aim was to spread the pain, and “seek to distribute the burden of the adjustment fairly among the various segments of the population and to protect the most vulnerable groups”.
Cyprus is in recession, with unemployment at around 15% and gross domestic product (GDP) down by 3.5% this year.
The country is already planning to introduce austerity measures equivalent to 5% of GDP between 2013 and 2015 through tax rises and spending cuts, but Christine Lagarde said further measures were needed.
The IMF chief said the corporation tax increase and raising of the tax on interest rates to 30% would help bring in another 2% of GDP.
In order to tackle its debt, additional cuts worth 4.5% of GDP would also be needed over the medium term to reach the target of a budget surplus of 4% of GDP by 2018, the IMF said.
Cypriot President Nicos Anastasiades warned there would be “difficult days ahead” that demanded a collective effort.
The IMF said the reform programme would also lead to changes in banking supervision and transparency.
Cyprus’s banking system has been seen by some as a haven for firms, particularly Russian businesses, who wish to avoid close scrutiny of their affairs.
The IMF said that the international rescue effort, which also involves the EU and the European Central Bank (ECB), would be “well paced”.
The IMF’s contribution will need to be ratified by its board in the coming weeks.
The International Monetary Fund has said it continues to have “confidence” in its managing director Christine Lagarde despite a French inquiry into alleged abuses of power.
An IMF spokesman said the fund’s board backed Christine Lagarde.
The probe relates to Christine Lagarde time as French finance minister and her involvement in the payment of compensation to businessman Bernard Tapie.
Christine Lagarde, who took over as IMF chief in 2011, denies any wrongdoing.
Her Paris apartment was searched by police investigators last week.
The IMF continues to have confidence in its managing director Christine Lagarde despite a French inquiry into alleged abuses of power
“The executive board has been briefed on this matter, including recently, and continues to express its confidence in the managing director’s ability to effectively carry out her duties,” said IMF spokesman Gerry Rice at a press conference on Thursday.
Christine Lagarde was involved in a dispute between French businessman Bernard Tapie and the bank Credit Lyonnais in 2007.
She referred the case to an arbitration panel, after which Bernard Tapie switched his support to Nicholas Sarkozy, then leader of Christine Lagarde’s UMP party, in the presidential election campaign.
Bernard Tapie was later awarded 400 million euros in damages by that panel – a decision approved by Christine Lagarde.
Christine Lagarde has yet to be placed under formal investigation in the case and has denied any wrongdoing.
However, the case comes at a difficult time for the IMF.
Christine Lagarde replaced IMF disgraced former chief Dominique Strauss-Kahn less than two years ago.
The IMF is also deeply involved in managing the continuing eurozone crisis, including the bailout of Cyprus.
French police have searched the Paris apartment of IMF chief Christine Lagarde, as they investigate her role in awarding financial compensation to businessman Bernard Tapie in 2008.
As finance minister, Christine Lagarde referred Bernard Tapie’s long-running dispute with bank Credit Lyonnais to an arbitration panel, which awarded him 400 million euros damages.
Bernard Tapie was a supporter of ex-President Nicolas Sarkozy.
Critics say Christine Lagarde abused her authority but she denies any wrongdoing.
“This search will help uncover the truth, which will contribute to exonerating my client from any criminal wrongdoing,” Christine Lagarde’s lawyer, Yves Repiquet, told the Reuters news agency.
Investigators suspect Bernard Tapie was granted a deal in return for his support of President Nicolas Sarkozy in the 2007 election.
There is speculation in France that Christine Lagarde could yet be placed under formal investigation in this case.
As finance minister, Christine Lagarde referred Bernard Tapie’s long-running dispute with bank Credit Lyonnais to an arbitration panel, which awarded him 400 million euros damages
The origins of the case date back 20 years.
Bernard Tapie, who has long been active in French business, sporting and political circles, sued Credit Lyonnais over its handling of the sale in 1993 of sportswear brand Adidas, in which he was a majority stakeholder.
After years in the courts, the case was referred by Christine Lagarde to an arbitration panel in 2007 and she approved its decision to award damages.
Critics said the case should not have been settled by private arbitration, since public money was at stake in the bank, which was part-owned by the state.
The settlement Bernard Tapie received is believed to be a far greater sum than he would likely have received from the courts.
In an interview in January, Christine Lagarde stood by her decision, saying it was “the best solution at the time”.
Christine Lagarde replaced the disgraced IMF head Dominique Strauss-Kahn, who was arrested in New York in 2011 on allegations of attempted rape.
Dominique Strauss-Kahn’s lawyers settled a civil case for an undisclosed sum and a criminal investigation was dropped by US prosecutors last year.
However, Christine Lagarde’s position at the IMF could be in jeopardy if she is placed under formal investigation.
Christine Lagarde’s term as IMF chief does not expire until 2016, but amid the complexities of Europe’s economic crisis this is a distraction she can ill afford.
Bernard Tapie case
1993: Credit Lyonnais bank handles sale of Adidas, in which Bernard Tapie is a majority stakeholder
1993-2007: Court battle drags on as Bernard Tapie claims Credit Lyonnais undervalued the sale and that he was cheated following the winding-up of the once publicly-owned bank
2007: Bernard Tapie, a former Socialist, switches to support Nicolas Sarkozy in the presidential election. Christine Lagarde, Nicolas Sarkozy’s finance minister, intervenes in the Tapie case to order binding arbitration
2008: Special panel of judges rules Bernard Tapie should receive damages of 285 million euros (400 million after interest added)
2011: Public prosecutor recommends judicial investigation into her actions
According an independent audit, Spain’s banks will need an injection of 59.3 billion euros ($76.3 billion) to survive a serious downturn.
The amount is broadly in line with market expectations of 60 billion euros, and follows so-called stress tests of 14 Spanish lenders.
Much of the money is expected to come from the eurozone rescue funds, the current EFSF and the future ESM.
Spain said in July that it would request eurozone support for its banks.
The Spanish banking sector has been in difficulty since the global financial crisis of 2008, and the subsequent bursting of the country’s property bubble and deep recession.
Spain’s banks will need an injection of 59.3 billion euros to survive a serious downturn
The European Commission welcomed the announcement, saying in a statement that it “is a major step in implementing the financial-assistance programme and towards strengthening the viability of, and confidence in, the Spanish banking sector”.
It added: “The necessary state aid provided to Spanish banks will be determined in the coming months.”
The Commission also said that it expected the first Spanish banks to start receiving the loans “by November.”
Christine Lagarde, managing director of the International Monetary Fund, praised the independent valuation of Spain’s banks, saying it had been “thorough and transparent”.
She added: “Public funding of the banks’ actual capital needs, which are expected to be lower than the amounts identified in the stress tests, can be financed comfortably under the recapitalization programme supported by Spain’s European partners.”
The audit calculation that Spain’s banks will need 59.3 billion euros is a worst-case scenario, and does not take into account any future plans by the lenders themselves to raise their own capital.
The country’s economy minister Fernando Jimenez Latorre indicated that it may need to borrow about 40 billion from the eurozone rescue funds.
Bankia was found to be the bank most in need of additional capital, requiring 24.7 billion euros. It was followed by Catalunya Bank (10.8 billion euros), Novagalicia (7.2 billion euros), Banco de Valencia (3.5 billion euros), Banco Popular (3.2 billion euros), Banco Mare Nostrum (2.2 billion euros), and Ibercaja-Liberbank-Caja (2.1 billion euros).
Seven Spanish banks have no need for extra capital – Santander, BBVA, Caixabank, Kutxabank, Sabadell, Bankinter, and Unicaja.
The audit was also based on a number of assumptions, including that Spain’s economy will contract by 6.5% between 2012 and 2014.
The Open Europe think tank suggested many of these were overly optimistic, however.
“These tests do look to be more intense than the previous ones but ultimately the optimistic assumptions do instantly raise questions over their credibility,” the group said.
“The prediction that unemployment will peak at 27.2% seems optimistic given that there is plenty more austerity and internal devaluation to come while the structural labor market reforms are yet to take effect.”
It added that a worsening economic situation would also increase the number of loans which are defaulted on and hit the value of the foreclosed properties which banks own.
The bigger question remains whether the Spanish government will have to follow Greece, Portugal and the Republic of Ireland and request a full international bailout, involving loans that have to be paid off by the state, as well as close monitoring of its economy by its international creditors.
While Madrid continues to publicly deny this, the markets consider it only a matter of time.
On Thursday, the Spanish government announced its latest austerity budget. Against a backdrop of violent protests, it outlined new spending cuts, but protected pensions.
Spain is struggling with a shrinking economy and 25% unemployment.
Comments from its central bank earlier this week indicated that the country’s recession deepened in the past three months.
As tax revenues fall and benefits payments rise in a recession, this will make it even harder for Spain to get its finances under control.
Spain’s decision to request a loan of up to 100 billion Euros ($125 billion) from eurozone funds to help shore up its struggling banks has won broad support.
The International Monetary Fund (IMF) said the bailout was big enough to restore credibility to Spain’s banks.
Washington welcomed the measure as a vital step towards the “financial union” of the eurozone.
The move was agreed during emergency talks between eurozone finance ministers on Saturday.
IMF managing director Christine Lagarde said the plan for Spain should provide “assurance that the financing needs of Spain’s banking system will be fully met”.
“I strongly welcome the statement by the Eurogroup, which complements the measures taken by the Spanish authorities in recent weeks to strengthen the banking system,” she said.
“The IMF stands ready, at the invitation of the Eurogroup members, to support the implementation and monitoring of this financial assistance through regular reporting.”
Spain's decision to request a loan of up to 100 billion Euros ($125 billion) from eurozone funds to help shore up its struggling banks has won broad support
US Treasury Secretary Timothy Geithner welcomed the latest moves as “important for the health of Spain’s economy and as concrete steps on the path to financial union, which is vital to the resilience of the euro area”.
France’s Finance Minister Pierre Moscovici said the deal would “contribute to restoring confidence in the eurozone”.
The president of the European Commission, Jose Manuel Barroso, said he was confident that through bank restructuring and other reforms, Spain could gradually regain the confidence of investors and create the conditions needed for sustainable growth and job creation.
Earlier, Spanish Economy Minister Luis de Guindos announced that his country would shortly make a formal request for assistance.
Luis de Guindos said the help would be for the financial system, not the economy as a whole.
“This is not a rescue,” he said.
He also said the aid would not come with new austerity measures attached to the economy. Spain has already imposed strict economic reforms in a bid to tackle its debt problems.
The loan will bolster Spain’s weakest banks, left with billions of Euros worth of bad loans following the collapse of a property boom and the recession that followed.
Some banks borrowed large amounts on the international markets to lend to developers and homebuyers, a riskier strategy than funding it with deposits from savings.
The exact amount that Spain will receive will be decided after the completion of two audits of its banks, due to be completed by the end of June.
The money will come from two funds created to help eurozone members in financial distress – the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), which enters into force next month.
Investors have recently demanded higher and higher costs to lend to Spain, making it too expensive for the country to borrow the money needed for a bank rescue from the markets.