Greece | IMF warns EU leaders to ‘act decisively’ or ‘face disaster’

As EU finance ministers scrambled to build a second bailout of Greece in the space of a year, but delayed throwing Athens a €12bn lifeline until next month, the IMF delivered its bluntest public criticism to date of the way EU leaders have handled the crisis.

"Policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome," the fund said in its annual assessment of the eurozone. "With deeply intertwined fiscal and financial problems, failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers … a disorderly outcome cannot be excluded."

The warning came as the Greek Prime Minister, George Papandreou, was trying to secure agreement from MPs for a package of measures to cut the country's huge debts that would mean deep wage cuts and sweeping privatisation. Later today, Papandreou faces a crucial parliamentary vote of confidence that could yet derail the delivery of the rescue funds.

After meeting the ministers in Luxembourg, John Lipsky, the IMF's acting head, warned that the Greek crisis would "be felt much more strongly around the world" if it was allowed to draw in core eurozone banks. He indirectly signalled that Europe's attempts to get to grips with the crisis over the past 18 months had been disjointed, indecisive, and unproductive.

Lipsky expressed frustration with EU leaders' slow handling of the crisis. "The crisis has brought the euro area to a crossroads … Only a cohesive and co-operative approach to crisis management will be successful," he said.