Germany rules out debt 'haircut' for Greece
October 30, 2012, 12:13 am TWN
BERLIN -- Germany on Monday stressed that it ruled out taking a “haircut, or write-off, on some of its holdings of Greek debt, saying that such a move would violate its budget laws.
Government spokesman Steffen Seibert told a regular news briefing that such a move, which newsweekly Der Spiegel reported would be suggested in a hotly awaited report by international auditors, was “out of the question.
“German budget law stipulates ... credit can only be extended if a loss is considered to be unlikely,” Seibert said.
“We cannot immediately extend new credit or loan guarantees to a party that is currently not paying back its debts. We would tie our own hands with such a measure and that is surely not in the interest of Greece. Germany and others thus see the issue of a haircut as out of the question.”
Finance Minister Wolfgang Schaeuble had on Sunday dismissed the idea of a further haircut for Greece, which would mean taxpayers would fund the bailout, as unrealistic.
“That is a discussion which has little to do with the reality in the member states of the eurozone,” he told public broadcaster Deutschlandfunk.
However, he suggested that Greece could buy back some of its debt at lower prices from bond holders.
Private investors in Greek debt agreed to write off the bulk of the value of their holdings as part of a second bailout package negotiated earlier this year.
But so-called “official sector” bondholders, including other eurozone governments, have until now been spared such a write-off.
Greece is striving to persuade the troika of international creditors it has made enough progress in reforms and painful austerity cuts to unlock a 31.5-billion-euro (US$41 billion) slice of aid needed to stave off bankruptcy.