The International Monetary Fund is privately pushing Greece to restructure its debt soon, a German magazine said Saturday, but the Greek government and the European Commission insisted a restructuring would not be discussed.
Without citing any sources, Der Spiegel reported that the IMF had reversed its previous opposition to the idea of a Greek restructuring and now believed the country's fiscal burden was unsustainable.
It wrote that senior IMF officials were recommending this to European governments because Greece's debt mountain was now roughly one-and-a-half times its annual economic output.
Early in March, IMF European Director Antonio Borges told reporters he was confident that Greek debt is sustainable, adding that the Greeks had made quite a bit of progress on their banks as well.
But since the IMF now believes current measures no longer suffice, it would like to see interest rates on Greek sovereign debt lowered, maturities extended or the amount of principal which Greece has to repay cut, Der Spiegel said.
European governments and the IMF are jointly contributing to and administering Greece's 110 billion euro ($155 billion) bailout, so a split between them on policy could be damaging to Greece's prospects for recovery.
Greek and European officials have long insisted that Greece can recover without restructuring its debt, and that even discussing a restructuring now would be counter-productive by damaging banks across Europe and causing panic in markets.
Greek Finance Minister George Papaconstantinou, speaking to Reuters at a conference in Italy Saturday, responded to the Der Spiegel report by saying: There is absolutely no chance of a restructuring of Greek debt.
He added, People (who talk about a restructuring) fail to understand that the costs would much outweigh the benefits.
European Commission spokesman Jens Mester said: All support measures are in place, and there is no reason now to start thinking of this possibility of restructuring Greece's debt.
Although the IMF believes Greece should soon begin talks with creditors on a debt restructuring, it is still not willing to call for the move openly out of fear this could increase market pressure on Portugal, Der Spiegel said. Portuguese bond yields have soared in the last several weeks because investors think Lisbon may soon be forced to seek a bailout.
(Reporting by Christiaan Hetzner, Renee Maltezou, Valentina Za and Charlie Dunmore; Writing by Andrew Torchia; Editing by Ron Askew)