($MACRO) Euro-zone diplomats say Greece's continued inability in the months ahead to meet conditions of its bailout agreement will ignite a debate among lenders over whether the aid should continue. One Northern European diplomat said it will come down to a political decision to give Greece more time and acknowledging that letting Greece default could devastate euro-zone financial markets.
A senior IMF official said it is becoming increasingly difficult for the troika to compile a positive progress report for Greece, because commitments on cost cutting and privatizations haven't been met.
"But that doesn't mean it won't get the next tranche," the IMF official said. "The Greeks are trying to correct decades of mistakes in a few months and the effort is recognized."
Worries about widening budget deficits come amid growing concerns inside Greece that the country may be caught in a debt spiral. Greece's newly created parliamentary budget office said in a report this week that Greece's debt dynamics are veering "out of control" and the country is unlikely to meet its deficit targets for the year.
Mr. Venizelos on Thursday rejected the report's findings, claiming in a statement that "the budget office does not yet have the knowledge and experience needed for its task."