Lenders press for Greece to be given new debt write-off

Report says taxpayers would bear brunt of the measure without funding from the ECB

Angela Merkel: The German Chancellor has firmly contested a fresh write-off of Greece’s debt (AFP)

The Troika of lenders overseeing Athens’ progress in meeting its reform programme was today reported to be pressing for a new Greek debt write-off to help ease the country’s deepening financial crisis, despite stiff opposition from Germany.

Der Spiegel magazine said representatives of the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission had advocated a write-off at a meeting held last Thursday to prepare for the next EU finance ministers summit, which will focus on Greece.

The German news magazine said the Troika plan did not envisage ECB help in funding a new Greek debt write-off, so taxpayers would bear the brunt of the measure if it were implemented. It said the ECB, which is holding about €40bn (£32bn) worth of Greek loans, could not join in any debt write-off for Athens because the bank was prohibited from undertaking this form of state financing. Greece was granted a partial financial sector- funded debt write-off last year.

Athens is widely reported to need up to €30bn to close a gap in the current EU funding plan.

The report implied that the Troika was becoming increasingly frustrated with Greece over its efforts to meet its reform deadline, and was said to have attached 150 new conditions to its debt write-off proposal, including measures that would make it easier to sack Greek workers, reduce minimum wage levels and lift privileges attached to certain professions.

The Troika is due to deliver its closing report on Greece’s reform progress by 12 November at the latest. An interim report has said that Athens has so far managed to implement 60 per cent of the reforms needed to qualify for its next tranche of €31.5bn bailout funding. A further 20 per cent are said to be under consideration with a further 20 per cent being unmet.

A new Greek debt write-off was proposed last month by the IMF’s director, Christine LaGarde. However the idea is strongly contested by Chancellor Angela Merkel’s government because of the impact it would have on German taxpayers, most of whom oppose more bailout money for Greece. Germany faces a general election next year.

The Troika proposal, although not publicly acknowledged, was dismissed by Ms Merkel’s finance minister, Wolfgang Schäuble, in an interview with German radio yesterday. Mr Schäuble stressed that under German budgetary law it was illegal to provide additional funding to a debtor country like Greece that had not met its financial commitments. “This is a discussion which has little in common with reality in eurozone member states,” he said.