Cantillon: How Christine Lagarde’s ‘potential’ was lost in translation

If loose lips sink ships, what might sink Greece? That was the question hovering over the G7 finance minister meeting in Dresden where journalists, banished to a windowless, newsless hotel cellar, pounced gratefully on what Christine Lagarde did or didn't say about Greece.

After a dull day on Thursday, the IMF chief electrified the Dresden gathering by apparently telling the Frankfurter Allgemeine (FAZ) daily that a Grexit scenario was a "possibility". Worse, this would be "not the end of the euro".

Soon after the newspaper flashed the story on its website and news wires whirled into action, the wheels began to come off the Lagarde wagon.

The FAZ withdrew the quotes from its online story without saying why, while the IMF suggested the FAZ quotes were a case of Chinese whispers.

So who said what? The FAZ asked Lagarde if a Grexit was weighing on her mind. She said the talks were "not a walk in the park" and expressed hope that Europe would "find a path to agree with the future of Greece within the euro zone. But, you know, it's a potential . . . "

Cut off at this point by another question, her staff say she intended to say “hypothesis”. How they know this is unclear, as they admitted they didn’t check with Lagarde herself.

By late Thursday evening the IMF was calling the FAZ every minute, demanding a retraction. The FAZ eventually performed a half retraction, removing the quote but not its gist. They insist they got the green light for their translation of the quotes from Lagarde's press people.

Cantillon, after taking a closer look at the evidence, can report that the FAZ took the word "potential" and translated it into German as "möglichkeit" which was then translated back into English by Reuters as "possibility". So, a word used in its original context as an adjective was lost in translation and became a noun, with potential to move markets.

No one looks good in this mess: the IMF chief was a little overly chatty, mentioning in public what everyone knows in public; her press people failed to spot the banana skin when they had the chance; and the FAZ, a furious critic of Greece and its EU/IMF programme, couldn't resist a dose of wishful thinking.

Suddenly the warning of US treasury secretary Jacob Lew seems prescient: "It takes only one accident . . . "