DUBLIN (Reuters) - Greece can return to financial markets "much before" the end of its current aid programme in the middle of next year, the deputy managing director of the euro zone's bailout fund said on Friday.
Greek government borrowing costs hit their lowest level in more than five years this week as the troubled euro zone state looks close to clinching a deal with its creditors to release new loans to the country.
That has given rise to investor speculation that Athens may soon end a near three-year exile from bond markets. The country's finance minister and central bank governor are due to speak in Germany next week about the prospects of such a return.
"If Greece continues to implement the reforms as promised, I am fully confident that it can access the market at least much before the end of the programme which is supposed to take place in the middle of next year," the European Stability Mechanism's Christophe Frankel told a conference in Dublin.
Debt relief is seen as a crucial factor in paving the route back to markets for Greece, but the issue has created friction between its two main lenders, the European Union and International Monetary Fund.
The Fund has made debt relief for Greece a condition for its participation in the latest bailout for Athens, the third one since 2010. Several euro zone governments, led by Berlin, want the IMF to participate for credibility reasons even though they disagree with the need for debt relief.
IMF chief Christine Lagarde said on Friday that lenders need more time to reach an agreement on debt relief for Greece because the euro zone is still not sufficiently clear in its intentions. Greece wants debt relief to be discussed at a meeting of euro zone finance ministers on May 22.
"I very much hope that the IMF will take part in the current third programme for Greece," said Frankel.
Euro zone officials have proposed turning the ESM into a body similar to the IMF -- a European Monetary Fund -- which they say would improve the management of crises in Europe.
Frankel said this could become a reality.
"In the future the role of the ESM may become even more similar to that of the IMF. At the moment it is just a plan, we could say it's just a dream but I think that now we have more reasons to think that this dream may come true," he said.
Reporting by John Geddie and Padraic Halpin; Editing by Hugh Lawson