Reuters
January 11, 2012
IMF chief Christine Lagarde is warning Europe that Greece's economic prospects are deteriorating and the European Union will either have to pony up more money to rescue Athens or debt holders will have to stomach steeper losses.
Unless the private sector or the EU contribute more to Greece's rescue, the International Monetary Fund will view the nation's debt load as unsustainable and may be unwilling to deliver more funds, IMF sources told Reuters as Lagarde met with Germany's and France's leaders in Europe.
Although the prospect of EU paymaster Germany coming up with more money seems remote, analysts believe European politicians and international lenders will eventually find a way to avoid a messy Greek default that would destabilize the continent and potentially undermine the global recovery.
But crafting a solution is growing increasingly difficult because IMF members, and in particular the United States and emerging countries, are reluctant to throw more money at Greece unless it is firmly back-stopped by fellow euro-zone members.
The sense of urgency has grown in recent weeks.
Sources said the IMF now believes the economic slowdown under way in Greece and the euro zone as a whole is proving deeper than it expected when the latest bailout was approved in principle in October. The projected cost then was already a hefty 130 billion euros.
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