International Monetary Fund board says Greece needs further debt relief

Yields on two-year Greek debt jumped to nearly 9.7 per cent this morning, the highest since last summer, after the International Monetary Fund (IMF) admitted its executive board was divided over the issue of the country's bailout.

Greece's economy is expected to grow 2.7 per cent this year, up from 0.4 per cent in 2016, the fund said.

"IMF involvement is necessary", Jeroen Dijsselbloem, Dutch finance minister, told lawmakers on Wednesday in The Hague.

The IMF chief said the Fund tried to be a "ruthless truth-teller" in its latest audit of Greece's economic policies released on Tuesday.

But deep divisions remain, with Greece refusing to implement new labor reforms and the International Monetary Fund at odds with European lenders over the extent to which the country's massive debts should be eased.


But in its recent assessment the Washington-based organisation said Greece is unlikely to meet budget targets in place under the bailout programme.

Since the financial crisis left it buried in debt and unable to issue bonds in financial markets, Greece has relied on global bailouts.

The IMF said most of its board members agreed that "despite Greece's enormous sacrifices and European partners' generous support, further relief may well be required to restore debt sustainability".

Its Eurozone creditors have forced it to make painful budget cuts that caused a deep recession.

Now the government of Greece has consistently reduced its levels of spending on infrastructure and other essential services, as the country struggles to meet its debt repayment obligations. The impasse needs to be bridged by the time euro-area finance ministers meet on February 20, their last gathering before European elections make an agreement politically hard. The IMF forecasts that government debt will reach 160% of gross domestic product (GDP) by 2030, and would "become explosive thereafter".

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