The IMF has said Greece must redouble its reform efforts otherwise it will not be able to cut its huge debt mountain.
The sternest warning yet came from the IMF’s chief of mission to Greece, Poul Thomsen, and as European officials raised the possibility of a Greek debt restructuring.
However the European Central Bank strongly rejects that idea. ECB Executive Board member Jurgen Stark, speaking in Lagonnisi, Greece, said: “It is an illusion to think that the debt restructuring would help to resolve the problems this country is facing.The debt restructuring will wipe out part or all of the capital of Greek banks. So this is the recipe for catastrophe.”
The European Central Bank is also worried that any restructuring by Greece would open the door for Portugal and Ireland to renege on some of its obligations.
The problem for the Athens government is a deep recession and persistent tax evasion have kept revenues low while reform efforts are bogged down in political wrangling.