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IMF pleased with progress in Greece, but still worried on debt and sees finances shortfall

ATHENS, Greece - The International Monetary Fund said Tuesday that Greece has made "significant progress" in repairing its economy, but warned it risked falling behind in reforms needed to make its massive national debt sustainable.

In a report, the IMF said Greek debt is expected to remain high "well into the next decade," peaking this year at an expected 174 per cent of gross domestic product.

It urged the government to increase efforts to liberalize markets, combat tax evasion and speed up public administration reforms. It also said it should help its exporters become more competitive and the banks deal with "a mountain of bad loans."

"There's still a bit to go, but I would say that Greece is close to the goal line," on improving its public finances, Poul Thomsen, head of the IMF's mission in Greece, said in a conference call with reporters.

The IMF report noted the country was falling behind in required labour market reforms, and said additional savings measures were needed to plug a public financing gap in 2015-16. Greece has pledged to extend austerity taxes that had been imposed temporarily, as a means of bridging the gap.

Thomsen said it was too early to say whether Greece would require additional money beyond the 240 billion euros ($325 billion) already granted in bailout loans.

"Yes, at this stage we do see a funding need. But it is quite possible that there are sources for closing it that would mean that there might not be the need for (eurozone) member states to approve new money," he said. "It's too early to say."

The IMF, Thomsen said, backed government pledges not to impose new cross-the-board pay cuts and to begin easing taxes.

Greece has depended on rescue loans from the IMF and other eurozone countries since mid-2010, when a financial crisis left it unable to borrow on international markets.

In return, successive governments have had to impose a series of deeply unpopular reforms, including spending cuts, salary and pension reductions and waves of tax hikes, which have spurred a dramatic rise in poverty and unemployment.

New ministers in the conservative-led government were sworn in Tuesday following a cabinet reshuffle ordered after Greece's anti-bailout left-wing opposition won European parliament elections last month. Gikas Hardouvelis, a 59-year-old economics professor and former banking executive, was appointed as the new finance minister.

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