Would forgiving Greece’s debt really be that bad?

As anti-bailout party Syriza leads polls ahead of a general election in Greece this coming weekend, the head of the International Monetary Fund warned Monday that the country couldn't renegotiate any debt restructuring deal without accepting "the consequences."

Greece's leftist, anti-austerity party Syriza has widened its lead over Prime Minister Antonis Samaras' New Democracy party according to a poll published Sunday in newspaper To Vima. Syriza has said the level of austerity imposed on Greece as a condition of its billion-euro bailout is unsustainable, and it would renegotiate the deal with the Troika of international organizations making sure the country sticks to the terms -- the European Commission, European Central Bank (ECB) and IMF.

However, restructuring Greek debt would not be without "consequences," the IMF's Managing Director Christine Lagarde warned Monday.

"A debt is a debt and it is a contract," IMF Managing Director Christine Lagarde told The Irish Times in an interview on Monday when asked about the general idea of holding a debt conference. "Defaulting, restructuring, changing the terms has consequences on the signature and the confidence in the signature," she said.

The newspaper added that Lagarde reserved judgement on whether whether Greece's debt pile, at 175 per cent of gross domestic product, is sustainable.

Read MoreGreece in 'critical' situation as Syriza leads polls

For its part, Syriza has proposed to hold a conference to agree some kind of cancellation of debt -- along the lines of a conference held in London in 1953 at which half of Germany's debt following World War Two was cancelled, enabling the country to recover economically.

Bar a major turnaround in the polls, Syriza's potential election victory is making markets nervous.

On Monday, the Greek stock market was trading down 0.35 percent and the yield on Greek 10-year government bonds had risen to 9.46 percent after following the decision by Fitch ratings agency on Friday to cut the outlook on the country's 'B' credit rating from "stable" to "negative."

Debt forgiveness not so bad?

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Not everyone believes that a Syriza win would be so terrible for the indebted country's economic outlook or populace, who have turned to the party and its leader, Alex Tsipras, largely due to the impact of the tough austerity measures demanded of Greece.

On Monday, the Jubilee Debt Campaign, an organization which campaigns against "unjust debts" said that its analysis of IMF figures showed that almost all of the money lent by the IMF, and Europe to Greece has been used to pay off "reckless lenders, with less than 10 percent of it reaching the Greek people."

"European and Greek banks have been bailed out, whilst a debt has been left with the Greek people," Tim Jones, an economist at the Jubilee Debt Campaign said Monday.

"This is the same unjust response to a financial crisis as happened across much of the developing world in the 1980s and 1990s. Debt needs to be cancelled, and we need a new process for dealing with debt crises so that lenders do not continue to be bailed out, leaving the cost with the public, and incentivising more reckless lending and turmoil."


Greece better off leaving euro zone

While parties like Syriza certainly see Greece's debts as unjust, creditors are worried about potentially huge losses if another Greek haircut takes place. There is also the concern that post-election negotiations could turn sour and Greece could ultimately leave – or be forced out of – the euro zone if it does not comply with its bailout conditions. Allowing Greece to restructure its debts could also set a precedent for other struggling economies.

But some market analysts believe that tor Greece, leaving the deflation-hit euro zone behind and adopting a new currency – or a return to its former currency, the drachma – could be the best move for the country.

"Three of the biggest problems that Greece faces are a lack of competitiveness, a huge private sector debt burden and limited political support for relentless austerity," economists Ben May and Tom Rogers at Oxford Economics said in a note last week.

"Absent debt relief, it is difficult to resolve these issues within the euro zone (and) by leaving the euro zone and allowing the new currency to depreciate, Greece could quickly restore competitiveness," they said.

Apart from being able to avoid what the economists forecast would be "a decade or more" of deflation and low growth within the euro zone, May and Rogers also said that uncertainty over Greece's future in the euro zone would disappear "leaving firms and households better placed to plan for the future."

"This, combined with greater control of the exchange rate, monetary and to a lesser extent fiscal policy, would leave Greece in a better position to achieve a period of healthy growth. On balance, then, Greece might be better off leaving the euro zone in the long term."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld