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IMF's Lagarde Warns of Consequences to Greek Debt Restructuring

FILE - International Monetary Fund (IMF) Managing Director Christine Lagarde speaks at the Council on Foreign Relations in Washington.

The head of the International Monetary Fund (IMF) warned Greece that there would be consequences to restructuring its debt after elections. Opponents of the country's 240 billion euro bailout lead in the polls.

Leftist Syriza, which widened its opinion poll lead over the ruling conservatives ahead of the Jan. 25 vote, has said it will cancel austerity imposed under the bailout and calls for an international conference to renegotiate debts of Greece and some other euro zone states.

Its leader, Alexis Tsipras, has suggested a conference modeled on the 1953 meeting in London at which Western powers agreed to cut the debts of West Germany by 50 percent after World War II. In December, he called for a similar “moment of solidarity” with Greece.

“As a principle, collective endeavors are welcome but at the same time a debt is a debt and it is a contract,” IMF Managing Director Christine Lagarde told The Irish Times in an interview on Monday when asked about the general idea of holding a debt conference.

“Defaulting, restructuring, changing the terms has consequences on the signature and the confidence in the signature,” she said.

The newspaper added that Lagarde reserved judgment on whether Greece's debt pile, at 175 per cent of annual economic output economic output, is sustainable.

It also quoted her as saying the broad endorsement of the European Central Bank's (ECB) unlimited sovereign bond-buying by the advocate general of the European Court of Justice, last week would provide “comfort” on the options available to them.

“We certainly hope that the ECB continues to support the recovery in Europe. It is needed. It cannot be the only one to do it but it has to do what it has to do,” she said, ahead of the ECB policy meeting on Thursday.