Merkel does not rule out Greek haircut after 2014

Published on NewsOK Modified: December 2, 2012 at 9:38 am •  Published: December 2, 2012
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BERLIN (AP) — Germany no longer rules out the possibility of forgiving Greece some of its debt once the country's finances are in order, Chancellor Angela Merkel said, signaling a softening of her government's tough stance on Greece.

The question of debt forgiveness, or a "haircut," can be revisited after the current bailout program will be successfully concluded and the government in Athens no longer takes on new debt, Merkel said in an interview with German Sunday tabloid Bild am Sonntag.

Merkel's government previously ruled out forgiving debt, arguing that Greece must implement the agreed austerity measures and structural reforms in return for its bailout loans. But the International Monetary Fund and many economists say eurozone nations must forgive Greece some of its debt to allow the country to overcome the crisis.

Greece is trapped by an unsustainable debt level — forecast to reach 190 percent of the country's economic output next year — which forces it to drastically slash its budget. That, in turn, deepens the country's recession and Greece's debt load measured relative to the size of its gross domestic product automatically rises even further.

When asked about a haircut on Greece's debt as a way out of the situation, Merkel told the newspaper "when Greece one day again manages with its revenue, without taking on new debt, then we have to look anew at the situation and reevaluate."

"That won't be before 2014-2015 if all goes as planned," she added.

Greece has promised its international creditors to achieve a budget surplus of 4.5 percent of its GDP by 2016, which would enable the country to start paying back parts of its debt load.