* Greece knows it cannot avoid restructuring- EU official
* Paper cites official speaking on condition of anonymity
* Says government has accepted need for mild restructuring
Greece has accepted that it cannot avoid restructuring its debt, a Greek newspaper cited a senior European Commission official as saying on Tuesday as market fears of such a move persisted despite denials by Athens.
Financial markets are increasingly convinced Greece will have to renegotiate the terms of its public debt, recognising that its economy cannot grow fast enough to service a burden that is set to swell to 160 percent of national output.
"The Greek government has realised that there is no other way and has accepted a mild debt restructuring," daily Eleftherotypia said, quoting a senior Commission official speaking on condition of anonymity.
Publicly, Greek ministers have consistently denied the government is considering such a move.
One solution to avoiding a restructuring would be for Greece to get additional loans from the EU and the IMF but this is very unlikely, the official told the paper.
Greece secured 110 billion euros in emergency funding from its euro zone partners and the IMF last May to cover bond maturities and fiscal shortfalls up to 2013 on condition that it shrinks deficits and implements economic reforms.
"With such high spreads and with a debt of about 1.5 times (annual) GDP, I think it is a matter of time when a mild restructuring takes place," the official was quoted as saying.
The yield spread of 10-year Greek government bonds over German bunds — the premium markets charge Greece to borrow — has widened to a record high of 1,134 basis points.
The official's comments echoed a report in German newspaper Die Welt late on Monday, which cited an unnamed Greek minister as saying that it is only a matter of time until the country moves to restructure the debt.
"The question now is no longer if we restructure but only when," Die Welt cited the minister as saying.
Publicly, however, EU and ECB officials have continuously rejected the scenario of restructuring, pointing to the negative impact the move would have on markets, banks and pension funds.
European Central Bank Board member Juergen Stark rejected the idea that debt-ridden euro zone states could restructure their debt, saying "it would not solve the problem — on the contrary."
