The IMF gave Greece an ultimatum yesterday to ramp up budget austerity to win rescue funds and avert bankruptcy and eurozone turmoil early next month.

The IMF criticised Greece for wasting time, being behind target with privatisation and for allowing reform momentum to slow down.

But it also forecast that the recession-hit economy will recover from wave after wave of crisis cutbacks and tax rises in 2013.

The International Monetary Fund’s representative to Greece, Bob Traa, said that more budget action was necessary.

“The privatisation is behind schedule because politicians can’t agree how to do it. If you wait the country will go to a default,” he warned.

He also called for urgent reforms to tax administration.

“Additional measures will be needed in order to reduce the budget deficit,” Mr Traa told a symposium.

“It is no secret that the (rescue) programme is at a difficult moment,” he said, adding that the Greek economy was likely to contract by 5.5 per cent of output in 2011 and 2.5 per cent on average in 2012.

European stock markets again fell sharply in response to inconclusive weekend EU talks in Poland on the eurozone crisis and signs of economic slowdown in Europe and the United States.

There is widespread speculation on financial markets that Greece risks not only bankruptcy but also departure from the eurozone, a possibility which would create chaos but which is strongly rejected by EU mainstays Germany and France.

Greece has come under much EU criticism for tax evasion and poor tax collection and Mr Traa said that urgent reform of tax administration was needed.

He said that time had been wasted since November and that IMF-EU audits of Greek finances and progress on reforms should perhaps be held on a monthly rather than the current quarterly basis.

“Even with the drama, things are slowing, so maybe we should come back every month,” he said.

But he also warned the government against constantly raising new taxes.

Greek Finance Minister Evangelos Venizelos admitted that the coming week would be “very difficult” for the eurozone as well as for Greece.

The IMF warning is a strong signal that auditors from the International Monetary Fund, European Union and European Central Bank are not ready to approve the next slice of funding under a first rescue for Greece.

The auditors left Greece unexpectedly part way through their work, and the resumption of contacts with top EU and IMF officials on the audit was being held by teleconference yesterday, and even that was delayed.

Greek ministers were then to meet on what Mr Venizelos described as new “concrete” measures.

Greek media reports suggest that the country, already shell shocked after two years of constant crisis since the incoming Socialist government admitted that growth and debt figures were false, is about to be hit with more measures totalling about €4 billion.

A senior official source said on Sunday that ministries had been told of 15 conditions from the EU and IMF, including layoffs in public bodies, a freeze on pensions between now and 2015 and the closure of about 30 public organisations.

Last week, under acute pressure to make up a shortfall of €2 billion under its rescue regime, Greece announced new measures including a controversial property tax.

The country, which won a first EU-IMF rescue totalling €110 billion in May 2010, has missed financial and privatisation conditions.

Amid signs that some EU decision makers are losing patience, Greece is fighting at the last minute to win approval for the next slice of €8 billion from that rescue to meet debt repayments, pay pensions and keep hospitals and other public services running.