UPDATE 2-IMF denies pressing Greece to restructure debt

* IMF supports Greek government’s position

* Greek finance minister says “no chance” of restructuring

(recasts with IMF denial of Der Spiegel report)

WASHINGTON/BERLIN, April 2 (Reuters) – The International
Monetary Fund on Saturday denied a report in German magazine Der
Spiegel that it was privately pressing Greece to restructure its
debt.

“As we have said consistently, the IMF supports the Greek
government’s position of no debt restructuring and its
determination to fully service its debt obligations. Any reports
claiming otherwise are wrong,” an IMF spokeswoman told Reuters.

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 one was necessary soon.

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. [ID:nN0788225]

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 on 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.”

Der Spiegel reported that the IMF was still not willing to
call openly for a Greek restructuring out of fear this could
increase market pressure on Portugal. Portuguese bond yields
have soared in the last several weeks because investors think
Lisbon may soon be forced to seek a bailout.

Many investors and analysts think an eventual Greek
restructuring may be inevitable. Cutting its credit rating of
Cyprus on Wednesday, Standard and Poor’s cited an “increasing
likelihood that the Greek government will restructure its debt”.

Former European Central Bank chief economist Otmar Issing
told Der Spiegel last month that Greece’s sovereign debt would
have to be restructured as soon as other euro zone countries
were out of danger.

Before any restructuring, however, Greece may try another
strategy. Papaconstantinou said on Wednesday that Athens might
use some proceeds from state asset sales to buy back outstanding
bonds from the market; since market prices of its debt have
dropped sharply below face value, this could have the effect of
a restructuring in lightening Greece’s debt load without
requiring Athens to conduct difficult talks with creditors.
(Reporting by Lesley Wroughton, Christiaan Hetzner, Renee
Maltezou, Valentina Za and Charlie Dunmore; Writing by Andrew
Torchia; Editing by Ron Askew)

UPDATE 2-IMF denies pressing Greece to restructure debt