The IMF's chief economist, Olivier Blanchard, said on Monday it looks like the 'haircut' on Greek private debt will be "very large" as negotiations between bondholders and the government drag on to cut Greece's debt burden.
"With respect to private creditors at this stage it looks like the haircut will be very large," Blanchard told an event at the Carnegie Endowment for International Peace, adding: "But that is only half of what it needs and it may be in a way its easier half, the other half is competitiveness."
Blanchard said Greece needs a "dramatic" reduction in its public debt. The IMF has said Greece needs to cut its debt to 120 percent of gross domestic product by 2020 to put its economy on a sustainable path.
For Greece to emerge from its current economic doldrums, the government needed to cut debt and curb wage costs to improve productivity and economic competitiveness, Blanchard said.
"Under a realistic scenario this is going to take a very long time and for a long time Greece will not be able to go back to markets," he said, adding that Greece needed a commitment from European partners and other lenders "for as long as it takes, which might be quite long."