Greek crisis descends into blame game

German finance minister Wolfgang Schauble said the eurozone nations cannot, by treaty, give Greece debt relief. Photo / AP

Greece is under mounting pressure to embark on a new wave of economic reforms, as its international creditors demand extra efforts to drag the country out of its latest crisis.

At the same time Germany is facing fresh demands from the International Monetary Fund (IMF) to write off some of the money it loaned to Greece in the most recent €86bn (£73bn) bailout.

And the IMF has been forced to defend its dire predictions of permanent economic gloom as the Greek government rejects the IMF's assessment of its reforms, public finances and economic performance.

The IMF tried to address its internal splits, stressing that it wants debt relief for Greece combined with economic reforms, not austerity. It does still demand serious action, though - unless the economy picks up and debts are slashed, it has warned Greece's debts are on an "explosive" path.

"Our strong preference is for a primary [Greek budget] surplus target of 1.5pc and that this should be accompanied by significant debt relief. We've referred to this as the 'two legs' of the programme that we think is required," said Gerry RIce, the IMF's spokesman.

"We think this target, the 1.5, can be obtained by the policies envisaged by the current European Stability Mechanism programme - in short, the IMF is not asking for any more austerity for Greece."

That passes much of the pressure on to Germany and the other nations which have loaned Greece money, but are unwilling to write off the debt.

Germany renewed the pressure on Greece to press ahead with more economic reforms.

Its finance minister Wolfgang Schauble told a German TV station that the Lisbon Treaty prevents governments from writing off these debts.

Instead, he argued, Greece must continue reforming to make its economy more competitive.

Meanwhile Klaus Regling, the managing director of the European Stability Mechanism, argued that "Greece's debt situation does not have to be cause for alarm".

Writing in the Financial Times, he said that the IMF has failed to fully appreciate the amount of support on offer from other eurozone countries to Greece, largely in the form of very generous loans.

"It is hard to overestimate the significance of this pledge, made by the finance ministers of the eurozone. Solidarity with Greece will continue," he said.

"We would not have lent this amount if we did not think we would get our money back," he said, ruling out debt relief and backing more economic reforms.