Global financiers at the IMF are increasingly unwilling to fund endless bailouts for the eurozone’s most troubled country, passing more of the burden on to the EU at a time when Germany does not want to keep sending cash to Athens.
The assessment opens up a fresh split with Europe over how to handle Greece’s massive public debts.
The IMF called on Europe to provide “significant debt relief” to the country despite Greece’s EU creditors previously ruling out any further rescue programme until the current one expires in 2018.
Jeroen Dijsselbloem, the Eurogroup president, repeated that position last night, saying there would be no Greek debt pardon and dismissing the IMF assessment of the country’s growth prospects as overly pessimistic.
“It’s surprising because Greece is already doing better than that report describes,” Mr Dijsselbloem, who chairs meetings of eurozone finance ministers said, adding that Greece was on track for a “pretty good recovery at the moment”.
The renewed divisions over how to handle the Greek debt crisis have raised fresh questions over whether the IMF will be a full participant in the next phase of the Greek rescue – a key condition for backing from the German and Dutch parliaments.
As Angela Merkel, the German chancellor, fights a tough re-election battle, Germany is particularly reluctant to send funds directly to Greece, with populist parties arguing that the payments amount to an unfair bailout from hard-working Germans to less deserving Greeks.
The IMF split came as British Prime Minister Theresa May last night comfortably defeated a Brexit rebellion in the Commons after MPs rejected Labour plans to give parliament a “meaningful” vote on the terms of a final deal.