Berlin associates Greek debt easing with strict monitoring
The German finance ministry is pushing for the creation of a mechanism to lighten Greece’s debt that would only be activated under certain conditions, and only in case Greece sticks to its fiscal and other commitments, according to documents revealed by German daily Handelsblatt.
The plans actually include a provision for an “automatic brake”, i.e. the immediate stop of the debt lightening measures, “in case the policy of Prime Minister Alexis Tsipras spirals out of control,” as the report clearly states.
These documents, that the German side has drafted ahead of Friday’s Eurogroup meeting in Sofia, render it clear that despite the fact the Social Democrat Olaf Scholz has now taken over at the Finance Ministry he sticks to the tough line of his predecessor, Wolfgang Schaeuble.
The German blueprint actually states that “the weak growth will not automatically grant Greece the right to reduce its payments toward servicing its debt,” referring to the French proposal that associates the easing of the debt with the Greek economic growth rate.
Germany obviously wants to ensure that Greece will continue to stick to its bailout commitments and to exercise a prudent fiscal policy even after the expiry of the bailout program this August, and views the debt-lightening measures as the means to exercise pressure for this target to be met.