The International Monetary Fund (IMF) urged Eurozone finance minister to start negotiating debt relief for cash-strapped Greece.
It comes as Greece is being paralysed by a 48-hour strike protesting government-proposed legislation to introduce tax and pension reforms.
IMF chief, Christine Largarde, said talks to find €3bn in “contingency” budget cuts had failed and debt relief must be considered immediately, in a letter to all 19 ministers sent last night and obtained by the Financial Times.
"We believe that specific [economic reform] measures, debt restructuring, and financing must now be discussed contemporaneously," she wrote.
“For us to support Greece with a new IMF arrangement, it is essential that the financing and debt relief from Greece’s European partners are based on fiscal targets that are realistic because they are supported by credible measures to reach them.”
This puts it at loggerheads with German which has repeatedly argued debt relief is illegal because EU treaties prohibit sharing debt burdens among Eurozone countries.
Public transport, government offices and ports in Greece ground to a halt today, as two of its largest unions protested reforms which would unlock further rescue funding under the country's multi-billion euro bailout deal.
The proposals would raise social security contributions, increase income tax for high earners and introduce a new national pension.
A tranche of about €5bn is overdue, after talks faltered over the pace of reforms. The Eurogroup is expected to discuss the stalemate on May 9.