Greece and its international lenders will renegotiate the program on which its second financial bailout is based because circumstances have changed, a senior eurozone official said on Tuesday.

Greece secured a second, 130 billion euro bailout package in February from Europe and the International Monetary Fund, but an inconclusive general election in May and a return to the ballot box last Sunday delayed the implementation of the conditions attached to the bailout.

Greek parties are currently in talks to create a coalition government with a mandate to renegotiate the terms of the bailout, which has staved off national bankruptcy, but at the cost of deeply unpopular austerity measures.

The United States, the largest IMF member, said it supported discussions to review the Greek bailout program, but German Chancellor Angela Merkel has said that loosening Greece's reform promises would be unacceptable.

"Anybody who would say that we need not, and cannot renegotiate the MoU (memorandum of understanding) is delusional, because he, or she, would be under the understanding that the whole program, the whole process, has remained completely on track ever since the weeks before the Greek first election,» the official said.

"Because the economic situation has changed, the situation of tax receipts has changed, the rhythm of implementation of the milestones has changed, the rhythm of privatisation has changed, if we were not to change the MoU, it does not work,» he said.

"We would be signing off on an illusion. So we have to sit down with our Greek colleagues and say: this is where we should be in July, and this is where we are in July, and there is a delta. Let's find out what the delta is and then how to deal with the delta - that is a new MoU,» the official said.

The official said representatives of the International Monetary Fund, the European Central Bank and the European Commission will come to Greece as soon as there is a new government to review the implementation of the program so far and prepare for negotiations.

"It is no secret, quite logical in fact, that due to the time passed without a functioning government in place that can take the required decisions, because of this, there have been significant delays,» the official said.

"The conclusion is that they have to engage in discussions on the memorandum of understanding and bring it back onto an even keel,» he said.

The troika will report its findings to euro zone finance ministers who will decide how to move forward, and troika officials will then negotiate with Greece.

"Once we have reached a satisfactory conclusion, a new MoU will be signed that will contain, as usual, the required milestones to be undertaken and disbursement scheduled, contingent on the successful conclusion of a review,» the official said.

Any review of the terms of the bailout would still retain the main goals of the programme, debt sustainability and reforms, the official said.

But he played down paying too much attention to precise numbers forecast far into the future.

"One of the main issues is that debt sustainability is achieved and maintained. There is sometimes a belief that there is a magic figure of 120 percent of GDP,» the official said.

"Anybody who can forecast the debt to GDP ratio of a country in a very, very volatile and challenging economic environment in 2020 is probably cleverer than all of us together,» he said.

"Debt sustainability is one of the two big targets. There are quite clear views in the Eurogroup on the fact that debt sustainability 4-8 years out cannot be compromised,» he said.

"That is one big target. The second big target is ... structural reforms in Greece by the Greek authorities, which are a necessary condition for bringing Greece on a growth track,» he said.

The official said it was unclear when a new memorandum of understanding could be signed, but said he expected it during the third quarter.

Asked if Greece would be given more time to reduce its budget deficit and debt, the official said: « I know there are a number of ministers who would say that at this stage I do not want any extension of the program. But there has been no discussion of this issue so far."

Greece will feature prominently in discussions of euro zone finance ministers, the Eurogroup, who meet on Thursday in Luxembourg. «There is . . . a need for adapting the MoU. Opinions on the degree of adaptation differ,» the official said.

Eurogroup President Jean-Claude Juncker told Austrian radio ORF on Tuesday t hat G reece could get more time for consolidation because of the depth of it s economic recession.

"There can there be no substantial new negotiations about the bailout conditions, but I signalled three or four weeks ago that there could be a shift in the timeframe, since the recession in Greece is considerably deeper than had been thought, so a stretching of the timeframe could be talked about,» Juncker said.

"I don't want to talk about the exact time plan. They're talking about two years - that would be the view of the prime minister-designate. I don't want to get involved in that detailed discussion,» he said.

Austrian Chancellor Werner Faymann was also open to discussing the timetable if Greece stuck to the reforms, saying: «How many months or years difference on the time horizon? That would be something to discuss with the Greeks."

According to the existing memorandum of understanding, Greece can seek more time for fiscal consolidation if recession is deeper than thought and first quarter data showed that the contraction was likely to be bigger than forecast.

Under the current agreement, Greece is to reduce its budget deficit to slightly more than 2 percent of GDP in 2014 from 9.3 percent in 2011.

[Reuters]