German Finance Minister Wolfgang Schaeuble has reaffirmed his staunch opposition to slashing Greece’s debt, even as the International Monetary Fund presses Athens’ creditors for such a move.
“We can’t agree a debt reduction for Greece, it’s ruled out by the (European Union’s) Treaty of Lisbon,” the conservative politician told ARD public television on Wednesday evening.
“For that, Greece would have to leave the monetary union,” he said.
The IMF this week released a report saying that Greece would not grow as fast as hoped and would be unable to repay its “highly unsustainable” debts in future.
Greece has gone through years of gruelling austerity measures since the 2008 financial crisis as it struggles with debt levels of 160 percent of GDP.
The eurozone wants Greece to deliver a 3.5 percent budget surplus before debt repayments, while the IMF believes it can manage around 1.5 percent.
The situation will become “explosive” in the long run if not addressed, the Washington-based institution warned.
Schaeuble said that any reduction in Greece’s debt would be a breach of eurozone rules that “no member country in the monetary union can be responsible for the debts of another.”
While reducing the the value of Greece’s debt — a so-called haircut — is one option of providing debt relief, its creditors could also lower interest rates and extend the repayment period.
“The pressure on Greece to make reforms and become competitive has to be maintained,” he went on. “Otherwise they won’t be able to remain in the single currency.”
Without debt relief, the IMF may withhold further financing for Greece — putting an 86-billion-euro ($92.4 billion) bailout programme agreed in 2015 in doubt.
German leaders have promised voters not to offer Greece any more financial aid without the IMF — with its reputation for competence in getting stricken countries back on their feet — being on board.
But the IMF’s reluctance to offer new funds without the debt being reduced has brought the parties to a familiar impasse.
Meanwhile, the EU’s European Stability Mechanism rescue fund said it saw “no reason” to be “alarmist” about Greek debt.
“We believe that Greece’s debt burden can be manageable, if the agreed reforms are fully implemented,” a spokesman said in late January.