Germany rules out Greek debt forgiveness

  • 20/07/2015
German Chancellor Angela Merkel (Reuters)
German Chancellor Angela Merkel (Reuters)

German Chancellor Angela Merkel has again ruled out forgiving some of Greece's crippling debt but said Berlin was open to a flexible repayment plan.

Merkel told public broadcaster ARD on Sunday "there can't be a classic haircut - forgiving 30 or 40 percent of debt - in a monetary union".

But she noted that Greece had received other forms of debt relief in recent years including a "voluntary writedown for private creditors, extended maturities and lower interest rates".

"We can discuss possibilities along those lines again," she said.

Merkel said that such steps could only be agreed when initial terms of a new 86 billion euros bailout package are hammered out.

The IMF, one of Greece's creditors alongside the EU and the European Central Bank, caused a stir this month with a bombshell report criticising the latest bailout deal and warning that lenders would have to go "far beyond" existing estimates for debt relief.

And on Thursday ECB chief Mario Draghi added his voice to calls for debt relief for Greece - whose debts amount to 180 per cent of economic output - saying the main question at this stage was what form this relief should take.

Merkel handily won a German parliamentary vote Friday (local time) to begin negotiations on a new bailout package.

But a rising number of deputies from her conservative camp have rebelled in successive votes on Greece and Merkel's hardline finance minister, Wolfgang Schaeuble, has suggested it might be better for Greece to take a five-year "time-out" from the euro.