European leaders must take tough decisions on Greece at a June summit before the IMF will disburse its share of a vital rescue loan, a senior IMF official said yesterday.

“I believe there is a summit in Europe by heads of state (in June) where some hard nuts need to be cracked and they need to make some decisions,” Bob Traa, the IMF’s senior resident representative for Greece, told a conference in Athens.

“And then actually we will be ready to go to our board and to disburse in early July because we know time is of the essence,” Mr Traa said.

The IMF official was referring to a loan instalment of €12 billion out of an overall €110 billion rescue package set aside for debt-hit Greece last year by the global lender and the European Union.

Athens urgently needs the money to pay next month’s bills.

And it looks increasingly likely to need more loans when that rescue package expires in 2013, but the IMF has threatened to withhold its share of the funding without new measures and support decisions to make Greece’s huge debt sustainable.

The International Monetary Fund has made no secret of its desire to see greater cohesion in Europe on addressing the Greek debt crisis, which was followed by similar bailouts in Ireland and Portugal within months.

“Greece’s partners in the euro area need to speak with one voice, leaving no doubt of their continued financial and political support,” Mr Traa said.

The Greek debt has exploded to over €350 billion and most analysts agree that a damaging restructuring in some form to enable the country to maintain its repayments cannot be avoided for long.

All sides close to the Greek rescue – the government in Athens, the EU, the IMF and the European Central Bank – have strongly warned against an outright restructuring, though there is some debate over milder forms of debt repayment that could include prior agreement with private lenders.

But observers of the Greek crisis have noted that only a broad restructuring would make a difference given the sheer size of the country’s obligations.

“If you want to do a debt restructuring that makes a difference, it needs to be very large,” Mr Traa agreed yesterday.

But he termed this a “dangerous” scenario that may not prove manageable once initiated and could create “untold” problems for Greece and the general eurozone area.

European leaders are to meet in late June to discuss Greece’s ongoing economic difficulties, and there are reports that an additional two-year rescue package of around €70 billion will be debated.

In order to win a pledge of more loans alongside pushed-back redemptions on existing debts, Greek Prime Minister George Papandreou had to agree to surrender some of Greece’s financial autonomy and accelerate a fire-sale of state assets.

The privatisation drive, worth €50 billion, includes choice companies such as the near-monopoly telecoms and electricity operators and the country’s two main ports of Piraeus and Thessaloniki.

The head of the Piraeus port authority and the town’s mayor have publicly opposed the sale plan.

Scores of thousands of people have taken over central Syntagma Square outside the Greek Parliament, with numbers growing day-by-day as ordinary Greeks vent their anger at what they see as politicians bowing down to European demands for austerity.

Mr Papandreou, who has unsuccessfully tried to muster political support from other parties for the cutbacks, hinted late on Monday that a referendum could be held on the issue.

“For the major changes we are implementing, I am ready to also make use of the institution of a referendum for the greatest possible consensus and (to gauge) opinion, as prescribed by the constitution,” he told the Cabinet.

He said preparations would be made to make a referendum possible “when needed.” The Prime Minister faces a key vote in parliament later in June for approval of a four-year economic adjustment programme worth over €28 billion that has been agreed with Athens’ trio of lenders, commonly called the ‘troika’ here.

He holds a six-seat majority in the chamber but several ruling party lawmakers have criticised the austerity package and could dissent.