Merkel Ally Says ‘Forget About’ Greek Sovereign Debt Writedown

A top ally of Chancellor Angela Merkel said European policy makers should “forget about” another sovereign debt writedown for Greece, warning that other countries would line up to seek a similar solution.

Volker Kauder, the parliamentary caucus leader of Merkel’s Christian Democratic-led bloc, reiterated the government’s position that it opposes a Greek writedown. Indebted euro-area nations should focus instead on reforms to boost their competitiveness and overcome the debt crisis.

“I don’t foresee a debt writedown for Greece whatsoever,” Kauder said in an interview today in Berlin. “Even a discussion about this paralyzes the reform efforts in these countries.”

Merkel has avoided discussion about further bailout measures for Greece as she seeks re-election on Sept. 22, saying that any decision on Greece will be taken next year. Der Spiegel magazine this week cited a Bundesbank document concluding that international creditors must come up with a new Greek rescue package by the beginning of 2014 at the latest.

Kauder also took aim at U.S. monetary policy, saying such measures as quantitative easing shouldn’t be adopted by the 17-nation euro area, where it could spur inflation.

“In Europe this would necessarily lead to higher inflation,” Kauder said. The U.S., in contrast, “has the advantage that they have China as a recipient of their dollars.”

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