Greece needs much larger debt relief from EU: IMF

Washington

The International Monetary Fund said Tuesday that Greece's EU creditors will have to go "far beyond" their existing estimates for debt relief to stabilize the country's finances.

The EU needs to decide between a dramatic extension of grace and payment periods for the debt, direct cash payments to the government to finance its deficit, or a debt "haircut", or writedown, the IMF said.

The Fund also warned that given "considerable" downside risks to the country's economic situation, Greece could need more than the 85 billion euros ($94 billion) tentatively agreed on Monday for the country's third bailout.

In an updated study of the country's situation  -- which was provide to EU leaders during negotiations over the weekend -- the IMF said Greece's debt burden over the next decade will be much higher than it estimated just two weeks ago, before the country shut down its banks and instituted capital controls in a showdown with its EU creditors.

For example, the new projections said the debt level would rise to almost 200 percent of GDP next year, compared to 177 percent in the previous estimate, in part due to the economy enduring another year of recession in 2015.

For 2022, the ratio would still be a huge 170 percent, instead of 142 percent in the previous estimate.