Greece’s debt levels may surge to “explosive levels” if significant debt relief is not found, the International Monetary Fund has said in a leaked confidential report.
In a damning appraisal of the finances of the EU’s weakest member state, the IMF warned that Greece’s debt could spiral to three times the country’s annual economic output within decades. The report was being prepared ahead of a meeting on February 6th, in which it will discuss its participation in the 86 million euro bailout given to the country.
Prime Minister Alexis Tsipras has just three more weeks to break the deadlock in increasingly difficult talks with creditors, and faces the difficult decision as to whether to agree to further austerity measure or call new elections.
The IMF’s assessment is crucial to Greek recovery, with further bailout funds depending on a positive outcome. If further funds are not unlocked the country could be plunged back into a crisis similar to that of summer 2015.
It is critical that a compromise is found,” said Aristides Hatzis, professor of law and economics at the university of Athens, told the Guardian.
“If these negotiations are not wrapped up by 20 February [when eurozone finance ministers next meet] we could be looking at potentially disastrous political turmoil, which would bring back the scenario of Grexit with a vengeance.”
Greek Prime Minister Alexis Tsipras, who has been consistently against introducing the harsh austerity measures wanted by the IMF, reached two years in office last week with his two-party coalition. He has recently declared that he was not prepared to take an “extra euro” in measures, but the IMF report suggests that even with further measures recommended by the fund the Greek debt load would still fail to improve.
The leaked report said: “Even with these ambitious polices in place, Greece cannot grow out of its debt problem. Greece requires substantial debt relief from its European partners to restore debt sustainability.”
The IMF declined to comment on the leaked report.