Debt crisis IMF attacks EU bailout

Greece's public debt had become "highly unsustainable" and some form of debt relief was now required

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The International Monetary Fund (IMF) has warned a third bailout of Greece may already be in jeopardy and attacked the deal offered by eurozone leaders.

It said Greece's public debt had become "highly unsustainable" and some form of debt relief was now required.

Late on Tuesday, the IMF made public advice it had given to the Eurogroup of finance ministers at the weekend.

That advice included proposals that would see some of Greece's enormous debt written off.

The split between the the IMF and Greece's European creditors over how best to deal with the country's debt crisis has been hinted at before, but this is the first time such a disagreement has been made public.

It is the first requirement of the deal offered after hours of negotiation in Brussels on Monday.

The measures - which face resistance from Prime Minister Alexis Tsipras' own MPs - include taxation increases and pension curbs.

Greece owes about 10% of its debt to the IMF.

It has missed two deadlines for repayment to the fund and is the first EU country ever to do so.

The BBC's economics editor says the IMF's assessment makes it much harder for Mr Tsipras to persuade the Athens parliament to back the measures needed in Wednesday's votes.

It brings into question the validity of the reform measures demanded by the eurozone and endorses the kind of debt write-offs the Greek public have been arguing for, he adds.

The IMF said it regarded forecast rates of growth for Greece as unrealistically high.

Its analysis released on Tuesday night pointed to Greek government debt reaching a peak of close to 200% of GDP or national income over the next two years, which it called "highly unsustainable".

On Tuesday, Mr Tsipras said in an interview on state television that he did not believe in the bailout offered but was willing to implement it to "avoid disaster for the country" and the collapse of the banks.

The conditional agreement to receive up to €86bn (£61bn; $95bn) from the EU over three years depends on further economic reforms - including the labour markets, banks and privatisation - being passed after Wednesday.

Hard-liners in Mr Tsipras' own Syriza party are likely to rebel and the junior coalition party, the Independent Greeks, have offered only limited support for the reforms.

Meanwhile, unions and trade associations representing those including civil servants, municipal workers and pharmacy owners have called or extended strikes to coincide with Wednesday's parliamentary votes.

Greece also faces an immediate cash crisis. Banks have been shut since 29 June.

Mr Tsipras warned banks are unlikely to reopen until the bailout deal is ratified, and this could take another month.

A suggestion of providing Greece with emergency funding under the EU-wide European Financial Stability Mechanism has been opposed by Britain, which is not part of the euro but is an European Union member.

Source: BBC

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