Greece back in the firing line as IMF reconsiders bailout deal

The statement hints that the IMF may be considering pulling out of the deal agreed by Athens and eurozone creditors in July

Christine Lagarde, the managing director of the IMF, has said that the budget targets set for Greece are 'highly unrealistic' and would require 'heroic' efforts by the Greek people (International Monetary Fund)

The bailout deal that rescued Greece from the jaws of bankruptcy may be on the brink of collapse after the International Monetary Fund said it was reconsidering its position as a creditor.

Christine Lagarde, the managing director of the IMF, has said that the budget targets set for Greece are “highly unrealistic” and would require “heroic” efforts by the Greek people to meet the level of austerity required.

The statement hints that the IMF may be considering pulling out of the deal agreed by Athens and eurozone creditors in July. Germany has warned that it would not be able to support the bailout plan without the IMF.

Lagarde was unable to say how the IMF would stay involved, except that it “will not walk away” from Greece.

The IMF wants Greece’s European partners to grant Athens substantial debt relief, contrary to Greek Finance Minister Euclid Tsakalotos and German Finance Minister Wolfgang Schaeuble, who told Reuters on Tuesday that he saw no need for debt restructuring.

The IMF has called for changes to value added tax, income tax and the public sector wage bill as well as cuts to pensions.

But Greece has resisted these tough measures, unwilling to hurt the country’s 2.7 million pensioners any more. They have already suffered 11 cuts to their monthly stipend since 2011.

Writing in the Financial Times, Greek prime minister Alexis Tsipras said that his government could not understand why the IMF wanted to change the reforms to make them “less progressive”, shifting the burden on to the “relatively poor”.

“Our government was reelected with a mandate to meet the twin objectives of fiscal discipline and credibility, on the one hand, and inclusion and social fairness, on the other,” Mr Tsipras said.

Yanis Varoufakis, the former Greek finance minister, said that the conflict between Greece’s European creditors and the IMF dates from the 2010 bailout of Greece.

“Five years on, this IMF-EU impasse continues, causing a one-third collapse of Greek GDP and fuelling hopelessness to a degree that has made real reform harder than ever,” he wrote in the German newspaper Der Spiegel.

“The IMF’s austerity package is inhuman because it will destroy hundreds of thousands of small businesses, defund society’s weakest, and turbocharge the humanitarian crisis.”

Mr Varoufakis said that a decision on the future of the deal will be suspended until July when default and another debt crisis "will loom".

"At that point, in July, the IMF plans to corner Chancellor Merkel into choosing what costs her less politically: Continuing with the Greek program without the IMF? Or granting the Greek state substantial debt relief?

"As long as Mrs Merkel chooses one of these two options, the IMF will be out of the woods: Either it will exit or the debt write-off will have rendered its Greek program consistent with its 'primary directive'," he wrote.

Athens has said it will submit pension and income tax legislation to parliament in the week beginning April 18.