The International Monetary Fund believes a plan for bondholders to shoulder some of the cost of a second bailout for Greece won’t revive the country’s economy without measures to bolster the country’s competitiveness.

‘It’s important to understand what problems Greece is facing: the public debt problem and the competitiveness problem,” Olivier Blanchard, the fund’s chief economist, said at a news conference in Washington. “In order to get out of the hole it has to solve both problems.”

European finance ministers at their meeting in Brussels told Greek officials to go back to the negotiating table with bondholders, saying the country should exchange existing securities for new ones at lower interest rates than what creditors are offering. At the same time, they said Greece’s commitment to fiscal and structural reforms needed to be strengthened if the country is to receive 130 billion euros ($169 billion) in public funds under a second package.

“It was decided that the banks, private lenders, would also take losses,” IMF Managing Director Christine Lagarde told France 2 television on Tuesday in Paris. “Now we have to know how much. The time has come to get serious.”

Lagarde said she has no doubt that political will existed for an agreement, though it had to be coordinated and required an effort “on the part of everyone, notably the banks.”

The IMF “has made it clear” that it thinks Greek debt as a percentage of gross domestic product shouldn’t exceed 120 percent by 2020, according to Blanchard, adding that it is the result the debt swap negotiations needed to achieve.

The Washington-based IMF cut its forecast for global growth this week and warned that the European debt crisis threatens to derail the world economy.

They forecast that the 17-nation eurozone will slip into mild recession in 2012, cutting the increase in global output from 3.25 per cent this year instead of the original forecast of 4 per cent.