Merkel’s Government Rejects Second Greek Debt Cut to Ease Crisis

German Chancellor Angela Merkel
Angela Merkel, Germany's chancellor. Photographer: David Gannon/AFP/Getty Images

Germany rejected a second debt writedown for Greece, digging in against suggestions for European governments to accept losses on Greek holdings.

“A new haircut is out of the question as far as the German government is concerned,” Steffen Seibert, Chancellor Angela Merkel’s chief spokesman, said at a regular news briefing in Berlin today. “We are working on sensible solutions with the Greeks and our European partners.”

Seibert was responding to a reporter’s question about comments by Rainer Bruederle, the parliamentary leader of Merkel’s Free Democratic coalition ally, in which he floated the idea of losses for Greece’s public creditors. Finance Minister Wolfgang Schaeuble said Oct. 11 that European governments can’t accept losses on Greek debt holdings.

Merkel, the leader of Europe’s biggest economy and the biggest country contributor to euro-area bailouts, says she wants to keep Greece in the currency union while avoiding new aid as the country that set off the debt crisis faces a sixth year of recession.

International Monetary Fund Managing Director Christine Lagarde suggested that Greece may need another debt cut, saying on Sept. 24 that the country’s financing gap won’t be bridged with budget measures alone. She said last week that Greece may need more time to meet its targets.

Investors have so far pledged 240 billion euros ($311 billion) in financial aid to Greece, which also had 100 billion euros of debt written off by private-sector investors this year in the biggest restructuring in history.

Greek ‘Friends’

Bruederle, a former German economy minister, said losses for public creditors may be worth considering, though such a plan “currently isn’t on the table,” according to comments quoted by the Berlin-based Die Welt newspaper on Oct 11.

Merkel, who triggered anti-austerity protests when she visited Athens for talks with Greek leaders on Oct. 9, struck a supportive tone toward Greece in her weekly podcast.

“My impression is that we are seeing progress step by step,” she said in the Oct. 13 video. “Often slower than we imagined, but we should always give Greece a chance.” Germany will demand that Greece fulfill commitments to overhaul its economy and help “as friends,” she said.

“We want Greece to stay in the euro, but the work isn’t completed,” Merkel told reporters in Berlin today.

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