Last Update: 13:24
Germany says ‘No’ to freezing of interest rates for the Greek debt until 2040 because that would cost creditors 120 billion euros, according to German financial newspaper Handelsblatt.
In a report regarding the issue of Greek debt relief, Handelsblatt says that German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble are against the proposal of freezing interest rates until 2040.
The report relies on German Ministry of Finance documents in which there is an estimation that possible freezing of interest rate payments on the Greek loans would end up costing lenders 120 billion euros. Such a rate freeze would amount in fact to “extended new loans,” members of the finance ministry note in the document.
According to the newspaper report, in April, Schaeuble will travel to Washington for the International Monetary Fund Spring Meeting. There, “behind closed doors,” the Greek crisis would be negotiated again, notes the report, and IMF Managing Director Christine Lagarde would press for Greek debt relief, to which the German finance minister will reply “No.”
The Handelsblatt report explains the conflict between Berlin and IMF on whether and under what conditions the Fund will participate financially in the third rescue program for Greece. As noted, despite public assurances by Schaeuble that the IMF will participate, “in the background there are completely different messages. (…) The Fund shall in no way abandon its demand for further cuts in servicing the (Greek) debt, even if the German finance ministry likes to show it is so.”
The German minister of finance agrees for debt relief measures after the completion of the current program in 2018, but not as extensive as one equaling to a new rescue package. According to the report, “the German finance ministry expects interest rates (for Greece) will reach an increase of 3.3% in 2040.”
Respectively, the report continues, the German chancellor has expressed her position that she imagines a further extension of the loan repayment period, but not a ceiling on interest rates. However, she noted that, “before embarking on discussions about debt relief, (Greece) needs to complete the second evaluation of the program.”