By Lesley Wroughton and Niluksi Koswanage
KUALA LUMPUR Nov 14 Greece needs a lasting
solution to its debt burden to avoid a prolonged crisis as
Europe's slowdown and U.S. fiscal problems dampen the economic
outlook in Asia, International Monetary Fund Managing Director
Christine Lagarde said on Wednesday.
The IMF expects a "real fix" for Greece that puts its debt
on a sustainable path as quickly as possible, Lagarde said,
showing no signs of backing down in a clash with the EU over how
Athens can bring its debt down to a sustainable level.
"Obviously, from the IMF's perspective, we expect a real
fix, not a quick fix, and that means clearly a debt that is
sustainable as quickly as possible," Lagarde told a news
conference in Malaysia at the start of a visit to Asia that will
also take her to the Philippines and Cambodia.
Euro zone finance ministers have suggested Greece, where the
euro zone debt crisis began, should be given until 2022 to lower
its debt to gross domestic product (GDP) ratio to 120 percent,
but Lagarde has insisted the existing target of 2020 should
remain, in an unusually public airing of disagreement.
The IMF is pushing back at having to return to Athens every
few months to renegotiate terms of Greece's bailout, which was
frozen by elections and slow reforms.
The IMF has pressed Europe to restructure Greece's official
debt owed to euro zone nations to reduce the country's debt
burden more aggressively. One option is to further lower the
interest rate on loans made to Greece and extend the repayment
time until the economy is healthy again.
Lagarde said that all of Greece's international partners
shared the same goal of ensuring the terms of the country's
bailout package were put on track and the country could access
financial markets as quickly as possible.
The IMF chief limited questions on Greece to one during the
news conference, saying she wanted to focus on her visit to
Southeast Asia where economic growth has been driven by domestic
demand and has remained resilient despite the global slowdown.
In a speech later, she said the European crisis and the
looming U.S. "fiscal cliff" meant there was "nowhere to hide" in
the global economy as the slowdown spreads to Asia and other
Brisk growth in Asia could not be taken for granted next
year, although the IMF expects it to expand 2 percentage points
faster than the global average, she said.
"It depends on the actions of global policymakers,
especially in the United States and Europe. And 'action' is the
operative word," Lagarde said.
The IMF last month cut its forecast for global growth in
2012 to 3.3 percent from 3.5 percent, and to 3.6 percent in 2013
from 3.9 percent previously.
The United States must avoid its so-called fiscal cliff of
expiring tax provisions and spending cuts, Lagarde said, adding
that the measures risk pushing the world's largest economy into
recession and smothering growth elsewhere.
"This policy uncertainty must be resolved, and it will
require all sides coming together," Lagarde said.
The administration of President Barack Obama and Congress
have several weeks to forge a deal on the so-called fiscal
cliff. The nonpartisan Congressional Budget Office estimates the
U.S. economy would contract 0.5 percent in 2013 if the
government fails to stop the budget cuts and tax increases --
far below the 2 percent growth economists currently forecast.
Eurozone leaders must deliver on their policy commitments
and forge ahead with fiscal and financial integration as they
seek a way out of the region's festering crisis, she said.
Again, "all players must play their part", Lagarde said.
She said Europe could learn from Asia's deleveraging and
trade openness as it rebounded from its 1997 financial crisis.
"Asia's economic foundations became safer, sounder, and more
resilient - but still open to the world and open for business.
This has important lessons for the advanced economies currently
facing severe challenges."
As with Europe, the best way for Asia to guard against
volatility was to push ahead with free trade and closer
financial integration, Lagarde said.
Lagarde said that China's current leadership transition
would be positive for Asia's biggest economy, once it is
completed, by relieving businesses and markets of uncertainty.
"The halo of uncertainty that prevailed over the transition
is going to be removed," she said.