BERLIN — Germany’s finance minister urged lawmakers on Friday to support a deal to trim Greece’s debt load and keep the country afloat, but insisted that it would be irresponsible to hold out the prospect of more radical debt forgiveness now.
The deal made Tuesday by the finance ministers of the 17 European Union countries that use the euro paved the way for Greece to receive €44 billion, or $57 billion, in critical rescue loans, without which the country would face bankruptcy and a possible exit from the euro.
It also contains measures, including a debt buyback program and an interest rate cut on loans that are aimed at cutting back Greece’s debts and giving it more time to push through economic reforms and trim its budget deficit.
It stops short, however, of forgiving outright debt owed to Germany, the lead creditor, and other euro zone governments. Chancellor Angela Merkel’s government has strongly opposed a discount, or “haircut,” in advance of elections next year.
Finance Minister Wolfgang Schäuble told lawmakers on Friday that the latest deal would keep the pressure on Greece to fulfill its promises and that blocking loan payouts would have ramifications all around Europe.
“We have always pushed the principle of conditionality, and that goes here too,” Mr. Schäuble said. “Greece will only receive all this relief if it continues to implement its reform measures, one after another.”
The German Parliament has to approve euro zone rescue measures. The bailouts of Greece and others have not been popular in Germany, Europe’s biggest economy, and there has been growing unease about them within Ms. Merkel’s coalition.
A solid majority is anticipated in Friday’s vote as two opposition parties are expected to vote largely in favor.
Many economists say that Greece’s debt burden — forecast to reach some 190 percent of its gross domestic product next year — can only be managed by writing off more government loans. Germany’s opposition parties also argue that the move will be inevitable sooner or later.
Frank-Walter Steinmeier, a leading member of the main opposition Social Democrats, said the deal on the table was “not a sustainable solution for Greece” and argued that the government had merely “bought time” — above all to avoid addressing “unpleasant truths.”
“Everything points toward a haircut in the end, but you are avoiding this truth like the plague,” Mr. Steinmeier told Mr. Schäuble.
Mr. Steinmeier said his party would back the deal, however, because “we cannot leave the Greeks in the lurch.”
The government argues that full-scale debt relief is legally impossible at present and would send the wrong message.
“If you say debt will be forgiven, then people’s readiness to save in order to get further aid is weakened,” Mr. Schäuble said. “If we want to help Greece along this difficult road, we must advance step by step, and the wrong speculation at the wrong time doesn’t solve the problem.”
Article source: http://www.nytimes.com/2012/12/01/business/global/german-finance-minister-urges-lawmakers-to-approve-greek-debt-deal.html?partner=rss&emc=rss
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