Germany seeks to delay debt relief for Greece

Political haggling over the next phase of the troubled Greek bailout took a new twist as Berlin dangled the prospect of debt relief for the country – but only after Germany’s federal elections next year.

The German stance is pivotal as its resistance to immediate relief comes while the International Monetary Fund presses hard for restructuring measures to ease the burden of the Greek debt.

The Washington-based fund may withdraw from the next round of the rescue programme if its demands are not met, putting Berlin in a difficult position as it has always insisted on IMF involvement as a precondition for German financial support for Greece.

German newspaper Handelsblatt reported yesterday that German finance minister Wolfgang Schäuble has signalled the possibility of some leeway, but not immediately.

According to Handelsblatt, the German finance ministry set out its position in a confidential letter to the parliamentary budget committee.

“These measures would be contingent on full implementation of the [Greek reform] programme by 2018,” it said.

Leeway

Federal elections are due in the second half of 2017 so the ministry’s letter implies that any leeway for Greece would come only after that hurdle is cleared. The extent to which the IMF might be willing to accept that timeline remains in doubt as it has been pushing for swift relief measures.

Handelsblatt quoted the finance ministry saying that "the IMF's participation is indispensable" in the bailout programme. Germany has always seen the fund's involvement in successive bailout as a guarantee of fiscal probity.