What is more, while a large-scale debt restructuring is necessary, it will be complicated.
But Germany, Greece's largest creditor, has so far resisted large-scale debt relief and is implacably opposed to any step that could lead to reducing Greece's debts.
But unlike in Iceland, where there was large-scale debt forgiveness, consumers and the government were left with big piles of debt.
The result was a widespread loss of credibility both for the fund and for recipient countries, leading to large-scale debt restructurings and forgiveness in the 1990s.
The IMF electrifies the referendum debate in Greece after it concedes that the country needs up to €60bn of extra funds over the next three years and large-scale debt relief.
Regulators like the comptroller of the currency and the Federal Reserve have been focused on maintaining the banks' capital levels, which could be hurt by large-scale debt forgiveness.
For during much of the 20th century, the situation was radically different: after the first world war and again after the second world war, Germany was the world's largest debtor, and in both cases owed its economic recovery to large-scale debt relief.
The International Monetary Fund has electrified the referendum debate in Greece after it conceded that the crisis-ridden country needs up to €60bn (£42bn) of extra funds over the next three years and large-scale debt relief to create "a breathing space" and stabilise the economy.
The deal – which includes austerity measures tougher than those overwhelmingly rejected by the Greek public in a referendum this month – has come under fresh fire after the International Monetary Fund published a highly critical paper calling for large-scale debt relief for the stricken country.
Adding to the uncertainty, the International Monetary Fund, one of Greece's three creditors, revealed on Thursday that Greece would need need €60bn (£42bn) of extra funds over the next three years and large-scale debt relief to create "a breathing space" for the economy.
The government should facilitate the development of a market for corporate control and induce a large-scale debt workout for distressed firms.
