EU faces crisis as IMF warns Greek debt is on ‘explosive’ path.
The EU faces a looming crisis with Greek debt which could threaten the sustainability of the Eurozone. The International Monetary Fund has warned Greece’s debts are on an “explosive” path, despite years of attempted austerity and economic reforms.
Global financiers at the IMF are increasingly unwilling to fund endless bailouts for the eurozone’s most troubled country. This has passed more of the burden onto the EU. This at a time when Germany does not want to keep sending cash to Athens.
Jeroen Dijsselbloem, the Eurogroup President repeated that position on Tuesday. He proclaimed that there would be no Greek debt forgiveness. Furthermore, he dismissed the IMF assessment of Greece’s growth prospects as overly pessimistic.
Greek GDP has started to grow. Their economy expanded by an estimated 0.4 per cent last year. Nevertheless, this is a very weak path. IMF economists expect the country to grow at less than 1 per cent per year over the long-term. Such growth would be too low for it to pay down its debts.
That means Greece’s “public debt remains highly unsustainable, despite generous official relief already provided by its European partners,” the IMF believes.