PARIS French Finance Minister Christine Lagarde said it is hard to see Greece returning to debt markets in 2012, as envisaged under an EU bailout package, and Europe would have to keep financing countries in difficulty to avoid a costly restructuring.
Lagarde said that no decision had been taken on the possible amount or form of any supplementary aid for Greece, but a debt restructuring was out of the question because it would mean higher interest rates for all euro zone members and losses for the ECB on its Greek debt portfolio.
"We totally exclude it in any form. Nor is there any question of Greece leaving the euro zone. I want to reassure investors," Lagarde told Le Figaro newspaper in an interview due to be published on Wednesday.
Asked about reports that a new aid package worth 60 billion euros ($86 billion) was being prepared for Greece, Lagarde said: "No decision has been taken."
Greek Finance Minister George Papaconstantinou had briefed a meeting of ministers from major euro zone countries on Friday on Athens' progress in implementing the terms of a 110 billion euro EU-IMF bailout, Lagarde said.
"A joint mission of the IMF, the European Commission and the ECB is currently in Athens. We cannot reach any conclusions before they return."
"Despite the government's efforts and the passage of important reforms, certain objectives particularly budgetary ones have been missed. Under these conditions, it is difficult to envisage a return to the markets in 2012," she told the paper.
"Nobody wants to keep funding countries in difficulty like this. But we absolutely must do it because a sovereign debt restructuring would send such a negative message to investors that the whole zone would suffer, the cost of refinancing for all its members would soar," she said.
"Besides, if there were a restructuring, the Greek bonds held by the ECB would suffer a big haircut," Lagarde said.
Lagarde said that the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) gave euro zone countries the tools they needed to face up to any situation. Greece's situation would be discussed at a monthly meeting of EU finance ministers on Monday, she said.
(Reporting by Daniel Flynn; Editing by James Dalgleish)