IMF Official Sees Greek Bailout Needing Several More Weeks of Talks

Comments come as U.S. privately urges Greek officials to reach a deal that would satisfy creditors

By IAN TALLEY and  GABRIELE STEINHAUSER

Updated April 17, 2015 8:14 p.m. ET

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WASHINGTON—Negotiations over fresh emergency financing for Greece are likely to take several more weeks, even though the cash-needy government in Athens requires a deal to help it meet a big increase in debt payments due in June, a senior International Monetary Fund official said Friday.

The IMF official’s comments come as the U.S., worried that Greece’s worsening financial crisis could spell trouble for a fragile global economy, urged Greek officials in private meetings to reach a deal that would satisfy Athens’ creditors.

“There’s no time to waste,” U.S. Treasury Secretary Jacob Lew said after a meeting with Greek Finance Minister Yanis Varoufakis. “If there is a crisis, it will first hit Greece, and it will hit the Greek people very hard. But it is something that the European and global economy doesn’t need, to have another crisis.”

Earlier in the day, IMF European Department chief Poul Thomsen said the fund needs a comprehensive package of economic policies from Athens before it can approve financing.

“We cannot conclude the review based on a few measures,” Mr. Thomsen told a news conference. “And that will clearly take several weeks more of discussion.”

Greece’s European creditors have expressed growing frustration with the new government in Athens, worried it won’t do what is needed to unlock bailout funds before it runs out of money.

Some eurozone officials have said the region is much better positioned than in previous years to handle the economic and financial fallout from a Greece eurozone exit. But Mr. Thomsen warned against such thinking. “Let me emphasize, one should not underestimate the risk of a Greek exit,” he said. Greece has said it wants to retain the euro as its currency.

A Greek Finance Ministry official in Athens said technical talks between the country and institutions overseeing its bailout would resume in Paris on Saturday afternoon. Besides Greece and the European Commission, the so-called Brussels Group includes the IMF and the European Central Bank.

Progress on a list of overhauls that the Greek government would implement in return for sustained aid has stalled in recent weeks. The left-wing government continues to resist further changes to Greece’s pension system and labor market. The previous government agreed to such measures in 2012 as part of the country’s €240 billion ($259 billion) rescue deal.

Prime Minister Alexis Tsipras and his Syriza party argue that such overhauls would further hurt an already suffering population and the country’s economy. Greece’s international creditors insist they are necessary to reduce the country’s debt and increase growth.

“There is undoubtedly a need for the negotiations to gain notably further momentum in the coming days and weeks in order for us to conclude a review in a timely manner,” Mr. Thomsen said.

Mr. Thomsen, one of the chief architects of Greece’s bailouts, said an accord for a new financing deal needs to be reached before several major debt payments come due starting in June. “Clearly it’s important that one reaches agreement on a comprehensive program that could unlock disbursement before then,” he said.

Economists and European officials warn that the standoff in bailout talks could result in a default on Greece’s obligations, triggering an unintentional exit from the monetary union.

Mr. Lew also said it was wrong to think that European and global markets are insulated. “I do not think that anyone can predict how markets will respond to dramatic changes in circumstances,” he said.

Write to Ian Talley at ian.talley@wsj.com and Gabriele Steinhauser at gabriele.steinhauser@wsj.com