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Berlin firmly against debt 'haircut' for Greece

The Local · 26 Nov 2012, 12:36

Published: 26 Nov 2012 12:36 GMT+01:00

"We are going into this meeting with the hope that a solution can be found to all outstanding questions," government spokesman Steffen Seibert told reporters at a regular news conference.

Later on Monday, eurozone ministers will attempt for the third time to clinch agreement on unfreezing a vital instalment of bailout aid worth about €31.2 billion as Greece stares again into the bankruptcy abyss.

But Seibert stressed again Berlin's opposition to a so-called "haircut" on Greece's debt - meaning that other eurozone governments and the European Central Bank would accept a write-down on the debt they currently hold.

"This official sector haircut is also not a topic for other countries in the eurozone. That's why the finance ministers will not be talking about it. It's also not a topic for the ECB," insisted Seibert.

Greece's private creditors have written off more than €100 billion in debt, and the IMF has urged the ECB, a public creditor, as well as other eurozone governments, to accept this solution.

With less than a year until elections, Germany is unwilling to take losses on its holdings of Greek debt and the ECB believes it is tantamount to monetary financing of a eurozone country - strictly forbidden by its founding treaty.

Seibert also pointed to legal complications."It is true that there are significant political objections to such a haircut. But above all, there are clear legal objections and not just in Germany," he said.

He noted that German budgetary law as well as EU laws stating that no country may bail out another stood in the way of a haircut.

Story continues below…

Politically, he said that if Greece were granted a haircut, then other countries under an EU bailout programme might also want one.

AFP/jlb

The Local (news@thelocal.de)

Your comments about this article

14:44 November 26, 2012 by Berlin fuer alles
What loan shark ever does accept a debt reduction from their victim?
20:49 November 26, 2012 by axlathi
Germany needs to stop living in denial - one way or the other, fair or not, they're going to have to foot a good portion of the bill. But the fact of the matter is, Germany has benefitted hugely from the EU and the euro, not least because a large amount of the debt incurred by countries like Greece was spent on German goods, and paying to help the euro zone extricate itself from the crisis, and stop acting as a brake on the world economy (and therefore German exports) is ultimately an investment in Germany's own future prosperity, especially given that the PIGS have been forced to enact reforms that will make them much more productive and potentially successful economies and societies moving forward. Alas they have waited a little too long to also reap the PR benefits of being saving Europe in its moment of need, which would have been a nice change given its reputation in the first half of the last century.
23:50 November 26, 2012 by Berlin fuer alles
You are right axiathi but Germany is doing what any loan shark does. Cutting off some limbs of the poor debtor in order to extract what is owed is an age old practice of loan sharks. Greece's balls are in a jar and Germany insists on kicking them everytime Greece is slow to repay the unsustainable debt Germany persuaded it to take out. Common practice from common criminals masquerading as elected representatives.
14:45 November 28, 2012 by raandy
If they do not write the debt down and keep loaning only to allow Greece to restructure it's debt, then they are only kicking the proverbial can down the road.

Christine Lagrade has hit out at EU need to write off some of Greece's debt to make it manageable. This has put her at odds with Chancellor Merkel who is facing reelection this coming September.

I would assume after the election the Chancellor would be more in favor of the so called hair cut.
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