* Advisor to Germany says Greek debt will be restructured
* German public bank assn says haircut not end of world
(Adds details, comments from banking association)
BERLIN, April 19 (Reuters) - Greece's extremely weak balance sheet means a restructuring is inevitable, an advisor to the German government said on Tuesday, as Germany's public banks said such a move would not be a catastrophe for the sector.
The statements are the latest sign of conviction in the EU's dominant economic power that Greece's 110 billion euro EU/IMF bailout will not allow it to avoid renegotiating its debt with creditors, despite denials from officials across Europe.
Clemens Fuest, who chairs the German finance ministry's technical advisory committee, told Reuters that Greece could barely manage to tread water since half the country's tax revenue must now be spent simply on meeting interest payments.
"One must recognise the realities -- I am expecting a haircut," the economist said. "(The interest payments) are breaking Greece."
The president of the Association of German Public Sector Banks said banks would be able to cope with a restructuring of Greek debt, a sign that the politically sensitive sector would not oppose such a move. [ID:nFAB016040]
A restructuring of Greek debt would be the first by a western European nation in over half a century and represents a challenge for EU policymakers struggling to reconcile the interests of their citizens with the costly steps needed to preserve the integrity of the 17-nation currency area.
Greece, saddled with a debt burden that is expected to swell to 160 percent of gross domestic product by 2013, has denied repeatedly that it plans to restructure. Bank of Greece Governor George Provopoulos warned on Monday it would have "catastrophic consequences." [ID:nLDE73H17X] (Reporting by Matthias Sobolewski and Alexander Huebner, writing by Brian Rohan; editing by Patrick Graham)