Bundesbank chief: more Greek debt cuts foreseeable | Business| Economy and finance news from a German perspective | DW | 16.11.2012
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Bundesbank chief: more Greek debt cuts foreseeable

The head of Germany's central bank has said he wouldn't categorically rule out further debt 'haircuts' for Greece. While agreeing that now is not the time to do that, he thinks it is probably inevitable at some point.

The president of the Germany's central bank, Jens Weidmann said on Friday he could imagine more debt cancellation measures for Greece at the cost of public creditors at a later stage.

Addressing a meeting of top managers organized by the German daily newspaper Süddeutsche Zeitung, the Bundesbank chief argued it was primarily a matter of timing.

Weidmann said further debt cancellation would not be about granting Greece "credit of trust." "But we should ask ourselves whether a second haircut could come about after Greece has carried out all necessary reforms."

He indicated another haircut would eventually become inevitable for Greece to regain full access to capital markets, but maintained that a measure like this, if implemented right now, would not resolve Greece's current structural problems and would see the country get back to square one in ten years' time.

Party-political strategies

The European Union and the International Monetary Fund (IMF) have been at loggerheads over the issue. While IMF Chief Christine Lagarde is in favor of an immediate second debt cancellation program which would see public creditors bleeding, eurozone finance ministers and the German government have flatly rejected the proposal.

Some two thirds of overall Greek debt directly affects public lenders, while private creditors were already asked to foot part of the overall bill in spring of this year.

With Germany heading towards a general election next year, the prospect of presenting taxpayers with a huge bill isn't one particularly liked by the coalition government of Christian Democrats and pro-business Free Democrats in Berlin. It's no wonder, then, that Chancellor Angela Merkel has been at the forefront of those categorically rejecting a second round of debt cancellation for Greece.

hg/mz (dpa, Reuters)