Greece debt crisis: EU comes round to US demands to scrap Greek debt...but Merkel has other plans

This isn’t the first time a US-based institution has tried to secure debt relief for Greece

European Council President Donald Tusk added to US pressure to offer debt relief to Greece on Thursday. (Getty)

European Council President Donald Tusk added to US pressure to offer debt relief to Greece on Thursday.

"The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors," Tusk said in a speech in Washington.

But the German Chancellor Angela Merkel ruled out a simple 'haircut', or slashing, of the debt total on Thursday. On a visit to Bosnia, Merkel said Germany had already dealt with the issue of Greece's debt sustainability in 2012. “I have said that a classic haircut is out of the question for me and that hasn’t changed between yesterday and today," she said, according to Reuters.

Pressure is nonetheless mounting for some kind of debt restructuring. Tusk's admission came after comments from officials at two Washington-based institutions on Wednesday pushing for Germany to change its terms.

Christine Lagarde, head of the International Monetary Fund, which is based in Washington, said that getting out of the Greek crisis would take both reforms and "debt restructuring". "Greece is in a situation of acute crisis, which needs to be addressed seriously and promptly," Lagarde said.

Jack Lew, the US Treasury secretary, said in a separate interview that it was time for Europe to retreat from its hard line on debt restructuring.

"In the next few days what we’ll see is [whether] the parties come together and build enough trust that Greece will take the actions that it needs to take so that Europe will restructure the debt in a way that is more sustainable," Lew said.

This isn’t the first time a US-based institution has tried to secure debt relief for Greece. Last week, Washington backed the IMF decision to put out a report on debt sustainability just days before the referendum in Greece.

Lagarde denied the timing was politically motivated. Tsipras used the report as leverage, however.

Sony Kapoor, managing director of the economics and finance think tank Re-Define, said that after the IMF report, some kind of restructuring was much more likely to feature in the deal. "I would not be surprised if it’s a tiered reduction of debt linked to performance on certain reforms, as measured by the institutions," he said.