The International Monetary Fund faces a tough dilemma with Greece, tugged between bending its standards to give more support to Athens or to push the country out on its own, at risk of a debacle for the eurozone.
A team from the global lender of last resort has been in Athens for three weeks trying to negotiate the next tranche of their 30 billion euro bailout loan to the country, part of a joint 110 billion euro packed with the European Union to save Greek finances.
If it goes ahead, it would be the largest loan the IMF had ever disbursed to one country.
But after warnings from both the EU and IMF that Greece is not meeting the conditions of the rescue, the next disbursement is not a done deal.
IMF acting managing director John Lipsky told Bloomberg Television Friday from Deauville, France, where the G-8 countries were meeting, that Greece has to follow through with reform commitments to get more money.
"It's pretty straightforward: there are conditions and criteria associated with the disbursal of funds, and our staff along with European colleagues are in Athens right now in discussions with the Greek authorities."
A day earlier IMF spokeswoman Caroline Atkinson said the Fund needed "assurances" on how Athens will fund its future to continue giving it support.
"We are certainly focusing on what can be the next steps for the economic program in Greece," she told reporters.
"And so we look for -- our technical term is financing assurances. We have to ask for financing assurances in every program."
The IMF never makes public its conditions for governments receiving bailout financing -- and the conditions are usually tough, economically and politically.
But in principle, the recipient has to make certain guarantees that it will be able to meet its financial obligations in the foreseeable future.
In other words, the Fund will not hand money to a country which will not be able to pay it or other creditors back under commitments made at the outset of the program.
"There are specific IMF rules and one of those rules says that the IMF can only take action when the refinancing guarantee is given over 12 months," Luxembourg Prime Minister Jean-Claude Juncker, who heads the eurozone finance ministers, warned Thursday.
Greece's government accounts are particularly worrisome. Saddled with massive debt and with income seized up by a shrinking economy, the country cannot borrow any more on commercial markets.
To raise money, it has committed, under pressure from its donors, to sell off 50 billion euros worth of state assets. But politically it has not yet been able to follow through.
Does it make sense for the IMF to continue in the belief that Athens can stabilize its finances? Even when private holders of Greek bonds already expect to take a loss?
According to one person close to the negotiations, the Fund has no desire to abandon Athens. But the person does not see Greece's current reform plans adequate to be able to pay its bills.
US economist Adam Lerrick, of the American Enterprise Institute, said the IMF is paying for big mistakes it made early on.
"The Greeks have tried very hard, much harder than the general expectation," he told AFP.
"But the fact is conditions on public finances have not been met. The program was flawed in its original design. To create confidence in a program, it must be fully funded from the start through its completion."
That was a reference to the IMF's expectation that private capital markets would take a key role in bridging Athens' financing gap -- which has not happened.
"In the end the Fund will lend the money. .. The Greeks will make new promises, the Europeans and the IMF will accept new relaxed conditions."
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