Berlin: Debt relief will not help
Schaeuble reacts to Obama’s call for reduction of Greek arrears, saying it would weaken the reform incentive
Berlin’s immediate response to US President Barack Obama’s call for Greek debt relief was to pour cold water on Athens’s aspirations, but the head of the Eurogroup did not rule out the possibility of a discussion next month on midterm debt relief measures.
Passauer Neue Presse daily reported late on Tuesday that German Finance Minister Wolfgang Schaeuble said, “Whoever says ‘We will relieve your debts’ is doing Greece a disservice,” a statement confirmed yesterday by the Finance Ministry in Berlin.
Schaeuble reportedly added that what Greece now needs is more reforms to become competitive, saying easing the debt would weaken the incentive for budget adjustment.
Berlin’s reaction to Obama’s call for debt relief for Greece came also from an official close to Chancellor Angela Merkel. Tabloid Bild wrote yesterday that “Prime Minister [Alexis] Tsipras, who had hopes of a debt haircut, gained nothing from the Obama visit,” adding that an adviser to Merkel said in reference to Obama’s talks in Berlin that “there is no point in Mr Obama trying, the [debt] easing is ruled out and so it will be.”
“We have noted that President Obama has pointed to the importance of debt relief. The Eurogroup agreed in May on a timetable on exactly that subject, regarding measures for the short term, and later in 2018 for midterm measures,” German government spokesman Steffen Seibert told a news conference.
Still, Eurogroup chief Jeroen Dijsselbloem said in London that, “in December, we will have to talk about short-term debt measures. There are some things we can do now and in the coming years a number of measures can be set up for the end of the program.”
He also noted: “The current Greek 1.0702 government seems to be very committed, and working much more constructively than previous governments. There is a degree of optimism.”
Dijsselbloem was more sympathetic to the demand for Greece to be given more realistic fiscal targets for its future primary budget surpluses: He said Greece must reach a primary surplus of 3.5 percent of gross domestic product in the midterm, but added, “The question is, what does midterm mean?”