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Germany Floats Greek Escrow Account as Schaeuble Sees No Default

Germany is proposing to toughen Greece’s access to international aid by setting up an escrow account outside its reach to guarantee payments of interest and debt to creditors, a government official said.

Finance Minister Wolfgang Schaeuble, who suggested that Greece will get more aid even while struggling to meet the conditions, wants a lasting solution to the country’s debt crisis to restore confidence in financial markets, the official, who asked not to be named, told reporters.

The so-called troika of European Commission, European Central Bank and International Monetary Fund yesterday said it expects a staff-level agreement in coming days that would pave the way for the next payment of aid funds to the debt-stricken country. Under Germany’s proposal, that money would go to the special fund.

A final deal will help unlock a 31 billion-euro ($40.6 billion) aid installment that the country needs to avoid a default. Greece remains on life support with the country mired in its fifth year of a recession that has shrunk the economy by almost 20 percent.

“It will not happen that there will be a ‘Staatsbankrott’ in Greece,” Schaeuble said in English at a forum in Singapore on Oct. 14, using the German word for sovereign default. The escrow account would be outside Greece’s control and force the country to cut spending or raise taxes to make ends meet, the official said.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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