Greece's finance minister said today that a restructuring of the country's debt involving haircuts would be a big mistake, reiterating steadfast government opposition to such a move.

Financial markets have been increasingly betting that some form of Greek debt restructuring will be necessary for the overborrowed country to get its economy back on track. Two German government advisers said on Saturday that a restructuring was inevitable.

"A restructuring, haircuts on debt, would be a huge mistake for the country," finance minister George Papaconstantinou told state TV Net's morning briefing show, as a visit by EU and IMF inspectors got under way to assess if the government's new austerity plans are tough enough to tidy up public finances.

"It would have a very big cost and we would not have the benefit, we would stay out of markets for 10-15 years, the wealth of Greek pension funds would suffer writedowns, we would have problems in the banking system and hence in the real economy," the minister said.

Mr Papaconstantinou said yesterday that Greece did, however, hope to get more time to repay loans under last May's €110 billion EU-IMF bailout.

Mounting fears that Greece will have to restructure a debt mountain expected to reach €340 billion this year - roughly one and a half times its output - have pummelled Greek bonds, driving yield spreads over German bunds to new record highs.

Today the yield spread of 10-year Greek government bonds over German bunds was at 1,260 basis points.

Mr Papaconstantinou projected the country's economy will start to grow again next year after a three-year recession. He cited double-digit growth in exports in the last five months and forecast the tourism sector will do well in 2011.

"I want to assure that we will get out of this situation ... it will depend on the work we do for things to normalise. Growth is not a magic button you press. Growth means regaining trust in Greece's economy, that's when markets open," he said.

Reuters