Germany’s Vice Chancellor Philipp Roesler ruled out another debt cut for Greece, saying that Europe’s largest economy can better aid Greeks by helping to modernize their country’s energy infrastructure.
Maintaining the pressure that comes from Greece’s “enormous” debt load is needed to ensure the country implements the economic policy changes required to render it competitive, Roesler, who is also German economy minister, said in an interview in Berlin yesterday.
“We do not need another haircut in Greece because I think they are very successful in their budget consolidation, in raising their export rates,” Roesler, 40, said yesterday in a Bloomberg Television interview. “The discussion about a haircut is not good for Greece, is not good for the euro zone.”
Greece, which in 2010 became the first euro-area country to request outside aid, is struggling to return to growth even after two bailout packages totaling 240 billion euros ($318 billion) and a cut in its debt load of about 100 billion euros. Creditors see Greece’s public debt peaking at 175.6 percent of gross domestic product this year and dropping below 120 percent of GDP by 2021.
German Finance Minister Wolfgang Schaeuble said during a visit to Athens on July 18 that “other measures” will be considered next year if Greece implements the steps required and achieves a primary surplus. That echoed a Nov. 27 decision by euro-region finance ministers to “consider further measures and assistance.”
“The debt in Greece is still huge and shows that they still have a long way to go,” Roesler said in a separate Bloomberg News interview yesterday. “Nevertheless, a shortcut wouldn’t be the solution, it would make the way only longer.”
Germany is willing to help as part of a three-stage process in which beneficiary countries stop piling up new debt and change their policies before receiving outside help, he said, citing Spain as an example of the success of the approach.
He cited storable concentrated solar power as a field of cooperation that would benefit Greece, where electricity is often generated by diesel-powered plants to supply consumers on the country’s more than 1,000 islands.
“A smart energy infrastructure helps the real economy,” he said.
Roesler, the leader of Chancellor Angela Merkel’s Free Democratic Party coalition partner, clashed with Merkel in September 2011 when he said that an orderly Greek insolvency shouldn’t be taboo. He subsequently defeated a rebel faction in the FDP that wanted the party to vote against aid to Greece and other troubled euro countries.
Roesler led a business delegation to Athens in October 2011 that was criticized by the opposition and media for failing to yield concrete results. “Mixed experiences” with his Greek counterparts in the previous government are now a thing of the past, he said, acknowledging progress made in cutting labor costs and privatizing state-owned companies.
“Sound fiscal policy in Greece on the one hand and structural reforms to strengthen competitiveness: that would be the right way out,” Roesler said. “There is no shortcut like bailout or haircuts,” nor printing money, which has failed to bolster economies seeking to escape their malaise, he said.