Angela Merkel rejects any debt writedown for Greece

Moscovici says Greece must honour commitments but wants it to remain in euro zone

German chancellor Angela Merkel (left) who has ruled out a haircut for Greece’s €320 billion debt. The new Syriza-led coalition in Greece - headed by Alexis Tsipras (right) has rejected any further dealings with the troika. Photographs: AFP

German chancellor Angela Merkel (left) who has ruled out a haircut for Greece’s €320 billion debt. The new Syriza-led coalition in Greece - headed by Alexis Tsipras (right) has rejected any further dealings with the troika. Photographs: AFP

 

German chancellor Angela Merkel and her finance minister have ruled out a debt haircut for Greece, rejecting the new Greek government’s demand to write off part of its €320 billion ($360 billion) debt.

“There was already a voluntary waiver by private creditors; Greece has already been exempt from billions by the banks. I don’t see a further debt haircut,” Mrs Merkel told German newspaper Die Welt in an interview published in its Saturday edition.

In comments reported by the Hamburger Abendblatt newspaper Mrs Merkel said she still wanted Greece to stay in the euro zone.

She said: “The aim of our policy was and is that Greece remains permanently part of the euro community. Europe will continue to show its solidarity with Greece, as with other countries hard hit by the crisis, if these countries carry out reforms and cost-saving measures.”

Mrs Merkel also told the Hamburger Abendblatt: “I do not envisage fresh debt cancellation.”

She said: “There has already been voluntary debt forgiveness by private creditors, banks have already slashed billions from Greece’s debt.”

Greece’s new leftist government opened talks on its bailout with European partners on Friday by flatly refusing to extend the programme or to cooperate with the international inspectors overseeing it.

The meeting marked the start of Athens’ drive to persuade its creditors to ease the strict terms of the bailout.

German finance minister Wolfgang Schaeuble told Die Welt: “If I were a responsible Greek politician, I wouldn’t lead any debates over a debt haircut.”

EU economic and financial affairs commissioner Pierre Moscovici told the BBC Greece had to honour its commitments, although he echoed Mrs Merkel in stating that he wanted Greece to remain in the euro zone.

“We believe that the place of Greece is in the euro zone, the euro needs Greece and that Greece needs and wants to be in the eurozone.

“We feel that it’s very important for the stability of the euro zone and for the credibility of the euro that there is no ‘Grexit’. This is why we will do everything that is needed to avoid it.”

Greece has rejected any further dealings with the troika, sparking fears of major tensions in negotiations with Europe in the weeks ahead and potential financial upheaval.

The new government does not plan to deal with the troika - the EU Commission, ECB and IMF - the country’s finance minister, Yanis Varoufakis, told the head of the eurogroup of euro zone finance ministers on Friday.

He also said that Greece will not seek an extension of its current bailout programme, due to run out at the end of February, and instead called for a debt deal negotiated between Europe’s governments.

The move raises questions about Greece’s ability to make debt repayments after the bailout programme runs out. It also threatens the future of ECB funding for its banking system, which is reliant on its agreement with the troika.

Speaking at the close of a tense press conference with the head of the euro group, Jeroen Dijsselbloem, the Greek finance minister announced that while his government would seek the “best possible agreement” with the “statutory, legal institutions” of the euro zone, EU and IMF, it would not deal with the troika as a group.

“We do not aim to work with a tripartite committee whose objective is to implement a programme which we consider to have an anti-European spirit and that according to the European Parliament is a committee built on shaky foundations,” the Greek minister said.

Mr Varoufakis, an economics professor who has written extensively against his country’s memorandum since it was signed in 2010, said his government had to respect its winning election platform.

He said that Greece did not want to extend its current bailout programme. Instead Greece wants a wider agreement with European governments, involving a write-down of some of its official debts.

Officially, a final €7.2 billion payment to Greece depends on the agreement on a new bailout being made. Without an agreement with the troika, Greece’s banks could be shut out of funding from the ECB, a fear already sparking deposit withdrawals.

At the press conference, a tense-looking Mr Dijsselbloem raised his eyebrows and shook his head in apparent surprise after hearing Mr Varoufakis’s rejection of the troika. After an awkward handshake, both men left the meeting without exchanging a word.

Earlier, Mr Dijsselbloem, who also had talks with prime minister Alexis Tsipras, said it was up to the Greek government “to determine its position towards us and to move forward together”. He warned against Athens taking unilateral action.

One analyst said that the Syriza-led coalition had made its position clear. “It wants to turn the way Greece co-operates with the euro zone on its head. Instead, it wants to submit its own reform programme in return for debt relief and lower primary surplus targets,” said Nick Malkoutzis, of website MacroPolis.gr.

Agencies