December 1, 2023

Germany Rejects Talk of Easing Bailout Terms

Debt-ridden Greece wants international lenders to further ease terms of the 110 billion euro, or roughly $160 billion, bailout granted a year ago by the International Monetary Fund and the European Union. It will most likely need additional assistance to plug a 27 billion euro hole next year.

On Tuesday, a day after Standard Poor’s cut Greece’s credit rating again, the country sold 1.62 billion euros of six-month treasury bills at 4.9 percent, up from 4.8 percent in April.

The Irish government, meanwhile, is watching to see what concessions Greece might win in hopes of softening Ireland’s 85 billion euro rescue package.

But Mrs. Merkel, as leader of Europe’s strongest economy and the biggest contributor to the rescue package, gave no indication that Germany would be willing to grant more aid — and certainly not at a meeting of European finance ministers next week.

She said she would wait until officials from the European Union, the European Central Bank and the International Monetary Fund completed their assessment of Greece’s progress, particularly concerning how it was carrying out its “bold reforms.” That report is due in June.

“First we need to hear what the status is,” Mrs. Merkel told reporters in Berlin. “Only then can I decide what, if anything, needs to be done. We don’t do Greece any favors by speculating about more aid.”

She said that Greece had made progress over the last year and that it was always known that “it would be a difficult path.” But she said efforts to improve competitiveness and reduce deficits must continue. “Every country should continue with them,” she said.

Mrs. Merkel faced enormous pressure at home last year not to grant a single euro in aid to Greece until Athens agreed to a tough austerity package and a radical savings program across the public sector.

While such public opposition has subsided, Mrs. Merkel now faces opposition within her own coalition. The Free Democrats, her junior partners, want to push through a motion at their party congress this weekend to prevent any more rescue packages for indebted euro states.

Mrs. Merkel brushed aside this opposition, saying she was convinced the Free Democrats would support the overall package.

Indeed, with Philipp Rösler expected to be elected the new leader of the Free Democrats this weekend — succeeding the foreign minister, Guido Westerwelle — and also taking over the Economics Ministry, Mrs. Merkel can expect more unity inside the coalition, government officials said Tuesday.

A new plan may include pushing back Greece’s budget goals, giving it additional aid and mildly restructuring its sovereign debt, officials and analysts have said.

Irish officials insist that their country’s debt burden, expected by the I.M.F. to peak at 125 percent of gross domestic product in 2013, is manageable — for now.

A leading Irish economist wrote in The Irish Times on Saturday that the country’s debt would hit 250 billion euros by 2014, bringing Ireland’s debt-to-G.D.P. ratio closer to Greece’s. The economist, Morgan Kelly, who has been called Ireland’s Doctor Doom for his gloomy predictions, said the country faced bankruptcy because of the European Union and I.M.F. bailout.

Mr. Kelly accused Patrick Honohan, Ireland’s central bank governor, of putting the European Central Bank’s interests over those of Ireland, which Mr. Honohan denied.

“The heavy debt and the growth of that debt is a serious problem and needs to be managed in discussion and in negotiation with our European partners,” Mr. Honohan said in an interview with the state broadcaster RTE.

Pat Rabbitte, the Irish energy minister, told RTE that the interest rate of 5.8 percent that Ireland is paying on its European loans “must be reduced, and in my own view the debt must also be rescheduled.”

Prime Minister Enda Kenny said in Dublin on Tuesday that talks on reducing that rate were under way with Ireland’s European partners.

European finance ministers will take up the issue on Monday and Tuesday in Brussels. Irish officials are hoping for a reduction of one percentage point.

“After the meeting next week, we will know whether a conclusion can be reached,” Mr. Kenny said, according to Reuters.

German officials, however, backed by the French, have been seeking some concession from the Irish in return for a reduction like the one given earlier to Greece, particularly regarding Ireland’s relatively low corporate tax rate. The Germans want the Irish to come up with some initiative, like agreeing to work on realigning the corporate tax base.

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