The International Monetary Fund warned Monday that Greece’s ongoing public debt crisis could result in a new global financial catastrophe if the European Union does not act quickly to stabilize the situation.
While the fund did note that the European recovery does seem to be moving on pace, the Greek crisis threatened to spill over and bring the whole eurozone down with it.
“While courageous attempts have been made to address the crisis, policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome,” an IMF statement on the European economy warned. “Failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers.”
Greece has been racked for months by angry, and many times violent, protests against austerity measures, which have cut deeply into public services. Another vote on 28.4 billion euros ($40.65 billion) in budget cuts is set for June 28, and the country’s creditors have said it must pass before bridge loans will be provided.
The measures up for a vote next week would allow EU officials would take over Greek tax collections, as the Greek tax system is rife with fraud. European officials would additionally be able to sell of 50 billion euros worth of public utilities to private companies as part of the deal.
A 12 billion euro loan, part of last year’s 110 billion euro ($156 billion) bailout, is needed to avoid a bottleneck in Athens’ repayments. EU ministers delayed approval for that emergency cashflow until Greece signs off on further budget cuts.
If Greek lawmakers approve the austerity measures, the money would arrive by mid-July.