German Finance Minister Wolfgang Schaeuble told conservative lawmakers on Friday that existing Greek reform pledges would not bring its debt down to levels that are considered sustainable, sources who attended the meeting said.
“Schaeuble said the current plans would leave Greece short of the goal of cutting debt to 120 percent of GDP by 2020,» one conservative source said.
Another source who attended the meeting said the minister had told parliamentarians Greece would only achieve a debt-to-GDP ratio of 136 percent in 2020 under its current plans.
The International Monetary Fund (IMF) has said that Greece’s debt needs to be reduced to 120 percent of GDP by 2020 to be sustainable.
However, that target now looks impossible and there are indications that the IMF, European Central Bank and European Commission would accept a figure of around 125 pct.
Schaeuble’s statement suggests there are still around 10-11 percentage points to be shaved off the total debt pile to make it sustainable. In money terms, that means finding a further 20 billion euros in savings, possibly via the official sector taking a writedown on its bond holdings.
Chancellor Angela Merkel told the same meeting, according to the first source, that it would be dangerous to allow Greece to default on its debt, saying that could unleash «uncontrollable consequences».