German Euroskeptic party calls Greek debt plan disguised forgiveness
Greece’s proposal to swap its foreign debt for growth-linked bonds is a disguised form of debt forgiveness, the leader of Germany’s Euroskeptic Alternative for Germany (AfD) party told Reuters on Tuesday.
“They’re using lots of words to try and conceal the truth but this debt restructuring, like any other kind of debt conversion or extension of maturities, reduces the debt’s cash value so it’s a form of debt forgiveness,” said Bernd Lucke.
“What the finance minister there is suggesting is nothing more than a haircut in disguise,” the economics professor said, using the term for a reduction in the amount of debt repaid to creditors.
“They’re trying to gloss over it so they don’t have to use the word ‘haircut’ but from an economic perspective it amounts to the same thing,” he said in a telephone interview.
Greece will not be able to pay back its debts even if it is allowed to convert the debt because the economy has limited growth prospects as long as it remains in the eurozone, Lucke said.
“Greece’s economic performance isn’t going to recover and that’s largely because it has the euro. Its private economy can’t become competitive as long as it has to work with a currency which is overvalued,” he said.
Lucke said Europe should nonetheless agree to a haircut because «the money is already lost anyway.” But debt forgiveness should be tied to a requirement for Greece to leave the eurozone because that was the only way the crisis-stricken country’s economy stood any chance of reviving, he said.
Greece’s new left-wing Syriza government has said it wants to end the country’s bailout deal and will not cooperate with inspectors from the “troika” of the International Monetary Fund, the European Central Bank and the European Commission.
Lucke said this was simply a declaration that Greece did not want to fulfil the conditions set by the ‘troika’.
“They’re basically asking if they can slam the brakes on their reform efforts without facing financial sanctions,” he said.
The AfD is Germany’s fastest growing party and has soared to 7 percent in national opinion polls since being set up in 2013 to tap hostility over international bailouts. Getting Greece out of the eurozone is one of its central policy platforms. [Reuters]
