German Minister of Finance Wolfgang Schaeuble said on Sunday that the crucial factor in negotiations over a debt-swap plan for Greece was that Athens should by 2020 have a sustainable level of borrowing.
“This goal must be achieved,” he told German public broadcaster ARD.
Chief negotiators for Greece’s private creditors left Athens on Saturday without a deal on a debt-swap plan that is vital to avert a chaotic default, sources close to the talks said.
A technical team stayed in the Greek capital to work on details, and negotiations will continue over the telephone, but it was unlikely a deal could be clinched before a crucial meeting yesterday of eurozone finance ministers, the sources said.
Asked whether a haircut of 70 percent on Greek debt would be sufficient, Schaeuble said: “It depends on the details. The negotiations are continuing.”
The IMF insists any deal must ensure Greece’s debt burden will be cut to 120 percent of GDP by 2020 from 160 percent now, as agreed at an EU summit in October, and has warned that this is made more difficult by a worsening of Athens’ economic prospects.
Schaeuble said Greece was having difficulty implementing reforms, but would have to; “otherwise, the situation cannot be resolved.”
Germany’s finance minister also rejected pressure to beef up the eurozone’s permanent rescue facility, saying Berlin would stick to the agreement made last month for a lending capacity of 500 billion euros (US$646 billion).
“We are sticking to what was agreed in December,” Schaeuble said. “In March we will check whether that is sufficient.”
The draft treaty establishing the European Stability Mechanism (ESM) was to be discussed by eurozone finance ministers yesterday and is likely to be approved by EU leaders at their summit on Jan. 30, eurozone officials have said.
Leaders from the single-currency bloc will review in March whether the limit of 500 billion euros is sufficient.
Markets and the European Commission, the European Central Bank, the US, Canada and Japan have been calling for the eurozone to bolster the capacity of its bailout funds.
However, the eurozone’s main paymaster, Germany, remains opposed.
Schaeuble said Germany was doing more than its fair share to resolve the eurozone’s debt crisis.
“The problems did not emerge in Germany,” he said.
“We are doing more than all the others and while the European unification has yielded great advantages for us, this does not mean that solidarity is a one-way street,” Schaeuble said.
He also said it was apparent that markets were beginning to regain confidence.
“We are not yet out of the woods, but over the past few weeks, many [debt] auctions have shown that the markets are beginning to regain confidence,” Schaeuble said.