Merkel does not rule out future Greek debt 'haircut'

BERLIN Sun Dec 2, 2012 8:47am IST

German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble wait to vote on financial help for Greece at the lower house of parliament, the Bundestag, in Berlin November 30, 2012. REUTERS/Wolfgang Rattay

German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble wait to vote on financial help for Greece at the lower house of parliament, the Bundestag, in Berlin November 30, 2012.

Credit: Reuters/Wolfgang Rattay

Related Topics

BERLIN (Reuters) - German Chancellor Angela Merkel said on Sunday that Greece's creditors may look at writing down more of its debt but not before the current bailout programme has run its course.

Last Tuesday Euro zone finance ministers and the IMF approved a package of measures including interest rate reductions and an extension of repayment periods aimed at cutting Greece's public debt to 124 percent of national output by 2020.

Germany insists a writedown of Greek debt held by euro zone governments would be illegal, though Finance Minister Wolfgang Schaeuble has also recently signalled that some kind of debt 'haircut' for official lenders might be needed eventually.

"If Greece one day handles its revenues again without taking on new debt, then we must take a look at the situation and assess it. That is not going to happen before 2014/2015 if all goes to plan," Merkel told the Bild am Sonntag newspaper.

The prospect of the German government taking a 'haircut' on the Greek debt it holds is politically risky for Merkel ahead of next year's federal elections when she will seek a third term.

Germans would see such a writedown as a move towards a 'transfer union' whereby richer northern European nations bankroll southern ones they consider indisciplined.

In her interview, Merkel denied suggestions that Germany's election timetable was the reason for ruling out a writedown of Greek debt at this stage, saying that Greece now had an extra two years until 2016 to meet tough fiscal goals.

Private creditors took a big haircut earlier this year. The International Monetary Fund and many economists say euro zone governments will also have to suffer losses before Greece's debt can be brought down to a sustainable level.

Merkel reiterated her view that pushing Greece out of the euro zone - a scenario favoured by a eurosceptic minority in her centre-right coalition - would prove far more costly than the bailout programme.

"We should avoid all instability," she said.

Germany's lower house of parliament, the Bundestag, approved the latest Greek bailout on Friday despite growing disquiet about the costs of the euro zone crisis to taxpayers.

Merkel did not manage to draw an absolute majority from her own ranks after 23 of her lawmakers rebelled.

(Reporting by Gareth Jones; editing by Jason Webb)

FILED UNDER:

Reuters Showcase

GDP Growth

GDP Growth

India revises up 2013/14 GDP growth to 6.9 percent.  Full Article 

Pharma Deal

Pharma Deal

Sun Pharmaceutical wins U.S. approval to buy Ranbaxy  Full Article 

Adani Restructuring

Adani Restructuring

Adani hives off power, ports businesses to boost growth.  Full Article 

Bank of Baroda

Bank of Baroda

Q3 net profit down 69 pct on higher provisions  Full Article 

Trading Fees

Trading Fees

BSE slashes fees in FX derivatives battle with NSE  Full Article 

SpiceJet Turnaround

SpiceJet Turnaround

SpiceJet board approves up to $243 mln share sale plan  Full Article 

Currency Market

Currency Market

RBI urges companies to hedge FX exposure  Full Article 

Banking Sector

Banking Sector

Banks say no room to cut lending rates, thwarting RBI easing  Full Article 

Reuters Poll

Reuters Poll

RBI seen holding rates steady on Tuesday, minority of analysts expect cut  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage