angela merkel.jpg
Photograph: EPA/KAY NIETFELD

German Chancellor Angela Merkel is meeting in Berlin on Tuesday with the leaders of the world's top five multi-lateral economic organizations as worries emerge that Europe could be facing a new financial crisis in Greece.

The chancellor is to host a meeting of the chiefs of the World Bank, the International Monetary Monetary Fund (IMF), the Organization for Economic Co-operation and Development (OECD), the World Trade Organization (WTO) and the International Labour Organization (ILO), as Greece's troubled finances return to the international centre stage.

Merkel's government was forced to rule out debt relief again this week following the weekend publication of comments said to be by a top IMF official criticizing Europe's failure to agree to cutting Athens' high debt level.

Officials from the European Central Bank, the IMF, the European Stability Mechanism and the European Commission also began in Athens this week a new review of Greece's progress in meeting the bailout commitments to enable it to unlock further loans.

"The leaked minutes from an internal IMF discussion and the arrival of Greece's creditors in Athens are a good reminder that the Greek crisis could easily escalate again and lead to another hot Greek summer in the eurozone," Carsten Brzeski, chief economist at ING Bank said.

"Eventually it could come down to a decision between a growth stimulus for Greece, debt restructuring or Grexit," said Brezeski.

Athens sees the IMF official's comments published on the whistleblowing website Wikileaks as signalling the IMF's plans to leave the 86-billion-euro (98-billion-dollar) rescue package that Greece hammered out last year to the European Union.

The IMF is waiting for the results of the review of Greece's progress in introducing reforms before it decides on whether to join the bailout, which was agreed to in a bid to help Greece stave off bankruptcy and remain a eurozone member state.

Last year, Merkel moved to rally sceptical members of her conservative Christian Democrat-led political bloc to back the Greek bailout in a parliamentary vote by saying that the IMF will take part in the rescue plan.

"The IMF Fund must participate in further aid to Greece" said Volker Kauder, who is a close Merkel ally and parliamentary leader of her political bloc.

He told a journalist association in Berlin that the chancellor's parliamentary faction could not agree to further debt reduction for Athens.

Greece is also a frontline state in Europe's refugee crisis, which is adding to the pressure on Europe's most indebted state.

The annual meeting between Merkel and the chiefs of the world's key economic organizations also comes against the backdrop of increased uncertainty about the outlook for the global economy following a slowdown in emerging markets and sluggish growth in Europe.

In addition to IMF chief Christine Lagarde, Tuesday's meeting in Merkel's office is to be attended by World Bank President Jim Yong Kim, OCED General Secretary Angel Gurria, WTO head Roberto Azevedo and ILO chief Guy Ryder.

The global economy has "weakened further" over the last six months, Lagarde said in a speech presented on Tuesday at the Goethe University in Frankfurt.

"The good news is that the recovery continues; we have growth; we are not in a crisis," she said. "The not so good news is that the recovery remains too slow, too fragile, and risks to its durability are increasing."

The slump in growth in China, lower commodity prices and looming fiscal tightening in many countries are worsening the slowdown. Russia and Brazil have suffered worse than expected downturns, while the Middle East has been hard hit by the sharp fall in oil prices, she said.

"Emerging markets had largely driven the recovery," Lagarde says, "and the expectation was that the advanced economies would pick up the growth baton. That has not happened."

Advanced economies continue to suffer from unresolved "legacies" of the 2008 financial crisis: high debt, very low inflation, high unemployment and lags in both investment and productivity.

"These risks are also exacerbated by political and other risks that transcend borders, and which feed uncertainty and fear," she says, citing terrorism and the refugee crisis.

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