German Chancellor Angela Merkel has not ruled out a so-called “haircut,” or writedown on Greek debt in the next few years, according to an interview with a newspaper yesterday, marking an apparent softening in position.
After being vehemently opposed to accepting a “haircut,” Merkel told Bild am Sonntag that it could be considered from 2014 if Greece’s financial situation improves.
“If Greece one day again manages on its revenues without incurring new debt, then we must look at and assess the situation. That is not the case before 2014 or 2015 if everything goes according to plan,” she said.
Opposition politicians have accused Merkel of playing down the need for a writedown of Greek debt holdings by public institutions such as other eurozone governments and the European Central Bank (ECB), because of federal elections expected to take place on Sept. 22.
In the interview, Merkel contested that she had refused a “haircut” due to the looming elections.
“The current aid program for Greece runs until 2014. For the achievement of certain budgetary goals we have given the Greeks two years more until 2016,” she said.
Many in Germany consider a writedown of Greek debt holdings to be inevitable.
However, on Friday German Finance Minister Wolfgang Schaeuble said speculation on a “haircut” sent “the wrong incentive” to Greece because it reduced the pressure on the Athens government to enact structural economic reforms.
Some eurozone states have said they would “not exclude” the possibility of writing off some debt from 2015 onwards.
Merkel also said she favored considering tougher sanctions for indebted eurozone states.
“In the long term I am definitely of the opinion that we consider how we develop in our laws procedures for states which do not comply with their commitments,” she said.
Merkel also told Bild am Sonntag that she understood the skepticism of many of her compatriots over Greece, but that she saw a determination in Athens to reorganize the country and that rescuing Greece from economic collapse was in Germany’s best interests.