Restructuring Greece's debt to make it sustainable is required for involvement of the International Monetary Fund in the latest bailout effort for Athens, the fund's second in command said Friday.
David Lipton told CNBC's "Squawk Box" he understands that European rules make a Greek debt haircut unlikely, but added, "there are a lot of ways to skin a cat."
"The important thing is Greece's debt service payments don't cripple the economy," he said. "We are open to the idea that the problem can be handled stretching out the maturities, providing longer grace periods and low interest rates."
IMF head Christine Lagarde reiterated Friday she believes Athens needs some sort of debt relief in addition to the other rescue measures contained in the third bailout for Greece.
"The bottom line for us, as always, is that the debt is made sustainable," Lipton told CNBC. "Yes, it is an absolute."
Lipton acknowledged the IMF's relationship over the years with Greece has been "difficult and complicated." Greece is in arrears to the International Monetary Fund on previous aid—missing a debt payment Monday and another one at end of June.
"[But] what's changed is that over the weekend everyone stepped up to the edge of the abyss and decided not to jump," he said—pointing to the renewed commitment from all sides to help Greece solve its problems within the euro zone.
While Greece needs to take stronger ownership in the process, "they understand full well that the approach that Europe takes is that it's support requires IMF involvement," Lipton said.
Asked if the IMF has a stake in whether Greece stays in the euro, Lipton said, "Greece has decided to stay in. Europe has decided in. They are our members. We're trying to help them."
"I get that many academics believe that 'grexit' would be better," he said. "But even with 'grexit' and depreciation, what really matters is Greek policies. If you depreciate and raise wages you don't have a competitive advantage."