The IMF has denied that chief executive Christine Lagarde said a Greek exit from the euro, the so-called Grexit scenario, was a "possibility" and blamed a game of multilingual Chinese whispers.
Germany’s Frankfurter Allgemeine daily ran quotes from Mrs Lagarde on their website on Thursday evening saying she no longer ruled out a Greek exit. A Grexit was a “possibility”, it quoted her saying. While not a scenario anyone wanted for Europe, she said it would “not be the end of the euro”.
Later in the evening the newspaper withdrew the quotes, which do not appear in its print edition, but maintained their line that she said a Greek exit was a possibility.
The IMF says the FAZ quotes are misleading, taken out of context and were mistranslated. Asked by the FAZ if, as a former French minister, she had a Grexit in mind in her dealings at the IMF, Mrs Lagarde’s full answer was: “Our mandate is financial stability around the globe. So any uncertainty, any potential vulnerability or volatility is a concern to us.”
“We are not naive and we don’t think that this is going to be or would be a walk in the park. It’s a complicated issue and it’s one that I hope the Europeans will not have to face because hopefully they will find a path to agree with the future of Greece within the Eurozone.”
“But, you know, it’s a potential......”
At this point she was cut off by a journalist asking another question. Her staff say she was intending to say “hypothesis”, though admitted to the Irish Times they had not confirmed this with Mrs Lagarde.
The FAZ took the word “potential” and translated into German as “möglichkeit” which was subsequently translated back into English by Reuters as “possibility”.
The FAZ, which has taken a highly critical line on Greece and the euro bailout system, stands by its quotes. They say they ran their German translation of the quotes by the IMF, which approved them. However they have removed the controversial statements from their story.
Senior officials at a G7 meeting in Dresden have played down the significance of the quotes. Behind closed doors, all senior figures here admit a Grexit is a possibility and one scenario among meany they have played through as part of their forward planning.
But none say they have a Grexit as part of their, as one source put it, “baseline calculation”.
“We have a programme that was starting to produce dividends, and if everyone sticks to it and does what it’s supposed to do, it should work,” said one senior official source at the G7 meeting. “We are working to make it work, that is our line.”
Other officials said they were confident the IMF had been misunderstood, knowing the consequence her remark would have on financial markets.
Amid uncertainty over Greece, European equities opened flat on Friday. The pan-European Stoxx 600 index was trading 0.03 percent lower by 8.20 a.m. Dublin time.
