Merkel says Greek debt sustainable, won’t need haircut

Ahead of Prime Minister Antonis Samaras’s visit to Berlin on Wednesday, German Chancellor Angela Merkel has told Kathimerini in an interview that she does not think Greece’s debt needs to be restructured for a second time.

Samaras will be in Berlin for a summit on youth unemployment. Merkel has invited the leaders and labor ministers of more than 20 EU countries to agree how to spend the 6 billion euros European leaders agreed last week to disburse in 2014 and 2015 to help young people find jobs, training and apprenticeships.

Kathimerini was one of six European newspapers granted a group interview with Merkel ahead of the summit to discuss the issue of youth unemployment. However, the chancellor also answered questions on the Greek economy and suggested a new writedown would not be needed to make the country’s debt sustainable.

“Greece has made progress thanks to the very reform-oriented government of [Prime Minister Antonis] Samaras,” she said. “I expect that debt sustainability will continue to be a given.”

Asked whether a new haircut on Greek debt would be needed, following the private sector involvement (PSI) in early 2012, the German chancellor said, “I don’t see that.”

Merkel also defended her decision to insist that the International Monetary Fund be involved in Greece’s bailout by saying that the organization had experience of dealing with indebted countries that helped the eurozone shape the programs. Last month, the IMF’s review of the Greek program suggested that the debt restructuring should have taken place much earlier, in 2010.

On the issue of youth unemployment, Merkel described it as “perhaps the most pressing problem facing Europe at the present time,” but insisted the best way to tackle it is through structural reform. Germany has halved its youth unemployment since 2005.

“Money alone won’t be enough,” she said. “We will need intelligent reform.”

A leading member of Germany’s opposition Social Democrats (SPD) Monday accused Merkel of holding a “show summit” to disguise the negative impact of the austerity policies the German chancellor has advocated. “We will only reverse the trend in countries with over 50 percent youth unemployment like Spain or Greece, or 40 percent in Italy, when we change overall economic policy in the European Union,” said Andrea Nahles, the SPD’s general secretary.

Samaras is due back in Athens on Wednesday evening and it is expected that by the time German Finance Minister Wolfgang Schaeuble visits Athens on July 18, the two countries will have agreed on a way for Berlin to be involved in a public investment fund. The Greek state will put up 300 million euros but it is expected that KfW, Germany’s government-owned development bank, will also participate.

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