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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Greece, which is about to enter its sixth consecutive year of a deep recession that has pushed unemployment up to 25 percent, is being kept afloat with rescue loans from its European partners and the International Monetary Fund.

German opposition leaders and analysts have accused Merkel of playing down the need to write off some of Greece's debt held by eurozone governments before national elections in Germany next year for fear of voter retribution.

When asked by the newspaper, Merkel did not directly address that charge, noting only that Greece's current bailout programs runs through 2014, hinting that she sees no need for yet new measures before then.

The hawkish head of Germany's central bank, Jens Weidmann, last month said that Greece will eventually need a haircut, but that it should only be granted after a prolonged period of budgets cuts, reforms and other adjustments there.

Analysts have estimated that a full-fledged haircut on Greek rescue loans could cost Germany, the main contributor to the bailouts, up to €17 billion ($22 billion) — more than 5 percent of Berlin's annual budget.

Merkel's comments came only two days after Germany's parliament voted in favor of granting Greece more lenient terms on its bailout program, clearing a necessary hurdle for disbursing a €44 billion ($57 billion) rescue loan payment in December that Athens needs to avoid bankruptcy.

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Juergen Baetz can be reached on Twitter at http://www.twitter.com/jbaetz