To read Ms. Lagarde’s statement, click image to enlarge
Key points are:
1) Per Lagarde, “of critical importance for Greece’s ability to return to a sustainable fiscal and growth path”, “the specification of remaining parametric fiscal measures, not least a sizeable package of pension reforms, needed to underpin the program’s still-ambitious medium-term primary surplus target and additional measures to decisively improve confidence in the banking sector—the government needs some more time to develop its program in more detail.”
In other words, the path to Eurogroup’s 3.5% long term primary surplus target on which everything (repeat – everything) as far as fiscal targets go, hinges is not yet specified in full. The Holy Grail is not in sight, yet…
2) “…I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own. Thus, it is equally critical …that Greece’s European partners make concrete commitments in the context of the first review of the ESM program to provide significant debt relief, well beyond what has been considered so far.”
In simple terms, for all the lingo pouring out of the Eurogroup tonight, Greece has not been fixed, its debt remains unsustainable for now and the IMF – which ESM Regling said tonight will be expected to chip into the Bailout 3.0 later this autumn – is still unsatisfied with the programme.
“Significant debt relief” – off the table so far per Eurogroup – is still IMF’s default setting.