The IMF is open to delaying Greece's repayment of its international bailout deal but a major restructuring of its debt would create untold problems in the euro zone, an IMF official said on Tuesday.

A senior Greek official also said that the government expected parliament to vote by the end of June on its medium-term austerity plan, a condition for a new international bailout by the IMF and European Union.

Athens has made progress in tackling its debt crisis but cannot afford to relax the pace of reforms, Bob Traa, the International Monetary Fund's senior representative in Greece, told a banking conference.

Greece is at a critical juncture and has no time to waste, now is not the time to slow down, he said.

Athens is trying to avoid defaulting on its debt, which totals 340 billion euros or about 150 percent of GDP.

EU officials are struggling to find a solution for its financing needs for the next few years which avoids triggering a default but pushes some of the burden onto the private sector.

If you want a debt restructuring that will really make a difference, it will need to be very large. Such a large debt restructuring would create untold problems not just in Greece, but also in the euro zone, Traa said.

But he did hint that the IMF was open to other solutions. Stretching out payment terms, for instance in loans from euro area partners and the IMF, is a reasonable thing to think about because we have amortization right at the end of the program. This is a technical issue we can think about, he said.

Greece has already won an extension of the time it has to repay loans extended under last year's 110 billion euro rescue mounted by the EU and IMF.

Traa stressed that his comments covered only Greece's official international lenders, the EU and IMF.

With regard to the technical issue, I was not referring to commercial debt, he told Reuters. I was only referring to the amortization hump for the loan agreement, for which we are finding an appropriate solution.

Euro zone politicians, including German Chancellor Angela Merkel, have made clear that private creditors must share some of the burden in a second rescue, which Greece agreed with the IMF, EU and European Central Bank last Friday.

The ECB strongly opposes cutting the overall value of Greek debt held privately, whereby creditors would receive less than the face value of government bonds when they matured.

However, it has signaled that it is open to the idea that creditors would agree voluntarily to buy new Greek bonds when old ones they hold mature, meaning that Athens would not have to produce the cash up front.

It is unclear whether private sector banks would sign up to such a deal, how much they would be prepared to contribute and whether ratings agencies would look on such a move as a default.

CLOSELY INTERTWINED

Economists fear that any Greek default would badly hurt banks, including those in Greece, which hold large amounts of bonds issued by the Athens government.

The fate of the Greek sovereign and the banking system remain closely intertwined. We do not favor a sovereign restructuring scenario, Traa said.

Greek banks are excluded from wholesale funding due to the country's crisis, and they rely on funding from the European Central Bank. But Traa said this had to end eventually.

The crisis has put Greek banks under a great deal of stress. The ECB's exceptional support needs to be unwound over time, he said.

Banks should increase further their capital cushions to help reduce markets' doubts.

Earlier, the senior official said the government also planned to cut corporate tax -- a demand of the conservative opposition -- and reduce value-added tax from 2012.

However, these measures would not be part of the medium-term economic plan, he told reporters after a marathon cabinet meeting which began on Monday but carried on into Tuesday.

Parliament will vote on the medium-term plan by the end of-June. It will be voted on as a single article, he said, asking not to be named.

Dissenters within the ruling PASOK party have demanded that each part of the plan, which includes 6.4 billion euros in new austerity steps this year and accelerated sales of state assets to cut the budget deficit, be handled in separate votes.

Voting on the plan as a single package would prevent the doubters from rejecting individual measures such as tax increases or sales of state assets.

The official signaled that the government had offered a concession to the opposition New Democracy party, which has demanded a corporate tax cut to stimulate the economy in return for its support for the latest austerity drive.

In September, there will be a new tax law lowering VAT and corporate tax rates from 2012. The law will be fiscally neutral, he said, without providing details.

A second official repeated government assurances that it would not seek early elections despite daily mass protests against yet more budget cuts.

The EU has called on all leading Greek parties to forge a consensus on the medium plan, which covers a period beyond the next scheduled elections in 2013.

Two senior government officials also said the government was not planning any referendum on austerity, even though Prime Minister George Papandreou said on Monday that he was open to studying legislation to facilitate such votes.

(Additional reporting by George Georgiopoulos and Ingrid Melander; writing by David Stamp; editing by Patrick Graham)

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