As eurozone finance ministers meet to discuss the Greek debt crisis, German Foreign Minister Sigmar Gabriel has demanded a firm commitment to debt relief. The move could cause friction in Berlin in an election year.
In Monday's edition of German daily Süddeutsche Zeitung, Gabriel (pictured above) spoke out against Germany's existing policy towards dealing with Greece's debt.
"Greece has always been promised debt relief when its reforms are implemented," said Gabriel, a member of the Social Democrats (SPD), the junior government coalition partners. "Now we must stand by that promise."
Germany's larger coalition partner, Chancellor Angela Merkel's Christian Democrats (CDU), opposes debt relief. It controls the Finance Ministry in the shape of Wolfgang Schäuble, who refuses to unlock more loans to Greece without the partnership of the International Monetary Fund (IMF). However, Gabriel claimed the IMF and a majority within the Eurogroup support further debt relief. This should not "fail because of German resistance," he said.
The IMF reportedly wants a maximum debt relief commitment upfront, while others would prefer to be more precise only in 2018, a senior eurozone official told the agency Reuters, referring to the end of the third bailout in mid-2018.
The issue is sensitive in Germany, where more debt relief for Greece is widely seen as a vote loser in the run-up to parliamentary elections in September. It has also been a bone of contention between the IMF and Schäuble, the eurozone's most influential official, for several months.
Ministers from the 19-member eurozone will discuss the subject at talks in Brussels later on Monday after Greek MPs fulfilled the latest demands for reforms in a vote last Thursday, giving the go-ahead for a further austerity package that includes pension reductions and tax increases. The vote satisfied the conditions of Greece's bailout and opened the way for debt relief as well as new loans meaning that Athens can repay a debt of 7 billion euros ($7.8 billion) in July.
If there is a debt deal, Athens reportedly has tentative plans for a return to bond markets as early as July. The IMF has made more debt relief a condition of taking part in Greece's latest 86-billion-euro bailout, its third since 2010. It has said that Greece's debt is unsustainable and will be "explosive" in the long run, requiring a new plan from Europe, including extending grace periods and maturities on the loans far beyond what the eurozone has committed to to data.
"I am sure that the German finance ministry is also interested in a solution and is working on it," Gabriel said. "The political blockade must now be dissolved [...] the citizens of Greece have suffered big social cuts."
Greece's debt stands at 180 percent of annual output, a legacy of the Greek debt crisis.
"Our country... has fulfilled its obligations totally and on time," Greek Finance Minister Euclid Tsakalotos said on Sunday. "There is no excuse for further delay on the issue of the debt relief," he added.
jbh/rt (AFP, Reuters)