IMF: Greece's Debts are Still Unsustainable, Despite Progress

Greece, which has been struggling for years with high debts and painful rates of unemployment, is making progress toward reducing its massive budget problems and restoring economic growth, the International Monetary Fund said Monday.

But the IMF said the country's debts remain “unsustainable” over the long term.

The IMF predicts Greece's economy will reach long-run growth of just under 1 percent a year, unimpressive but an improvement on years when the economy was shrinking. And Greece will meet the IMF's target by reporting primary annual budget surpluses - which do not include interest payments - equal to 1.5 percent of economic output.

Since the financial crisis left it buried in debt and unable to issue bonds in financial markets, Greece has relied on international bailouts. Its eurozone creditors have forced it to make painful budget cuts that caused a deep recession. Unemployment is 23 percent. Most IMF directors said Greece doesn't need any more austerity. But they said the country should reduce pension payments and make more people pay taxes to raise money to help the poor and cut overall tax rates.

The country's debt is unsustainable at around 180 percent of gross domestic product, the broadest measure of economic output, the IMF said. Most IMF directors say the country will probably need debt relief to pay its bills over the long term.

Greece is under pressure to conclude its latest bailout negotiations in time for a scheduled Feb. 20 meeting of eurozone finance ministers. That would allow the country to join the European Central Bank's bond-buying program, which would boost market confidence and make it easier for Greece to return to the bond market later this year.