Greek Return

Loud Calls for Greek Debt Relief

greek protester-reuters
Greek riot police officers dodge petrol bomb thrown by protesters during minor clashes following a protest outside parliament in central Athens.

Momentum is building to grant Greece debt relief, as the country struggles with painful reform measures to unlock a new round of bailout cash from its European and international creditors.

Ahead of a meeting of euro zone finance ministers in Brussels on Monday, Christine Lagarde, the head of the International Monetary Fund, urged the ministers to immediately discuss plans for debt relief. In a letter obtained by Handelsblatt, Ms. Lagarde warned that the IMF’s continued involvement in a third aid program for Greece is uncertain if the country’s European partners refuse to grant Athens substantial relief of its debt.

Her comments come just as Greece approved a new major package of pension and tax reforms. Ms. Lagarde said it is “unrealistic” to demand further cuts and austerity measures from the Greeks that go beyond those commitments already made, she wrote in the letter.

Germany’s vice chancellor and economics minister, Sigmar Gabriel, echoed the same view in a weekend interview with Reuters, saying it made no sense to crush the sprouts of economic recovery in Greece with further austerity measures.

“The euro group meeting on Monday must find a way to break the vicious circle,” Mr. Gabriel said in an interview with Reuters. “Everyone knows that this debt relief will have to come at some point. It makes no sense to shirk from that time and time again.”

“The euro group meeting on Monday must find a way to break the vicious circle.”

Sigmar Gabriel, German Vice Chancellor and Economics Minister

Ms. Lagarde, Mr. Gabriel and others are clearly increasing pressure on German Finance Minister Wolfgang Schäuble, a member of the center-right Christian Democratic Union, who opposes debt relief or even debt forgiveness for the Greeks. Mr. Schäuble also wants the IMF to participate in the third package for Greece.

The talks take place amid a background of violent demonstrations and strikes in Athens over planned budget cuts worth €5.4 billion ($6.2 billion).

Greek lawmakers in the early hours of Monday approved a package of unpopular pension and tax reforms in the hope of persuading its creditors to release more money from the third aid package, approved last summer, and worth up to €86 billion ($98 billion) in total. Greece will need a fresh infusion of cash from the bailout in July at the latest, when billions in loans are due for repayment.

So far, the IMF has not committed to backing the new aid package.

The controversial bills that Greek Prime Minister Alexis Tsipras pushed through parliament with a narrow majority of 153 votes out of a total 300 are some of the toughest measures yet that the thrice bailed-out nation has been forced to enact since the beginning of its debt crisis.

Greece is suffocating under a staggering debt load – the largest in Europe at over 180 percent of its gross domestic product, or GDP.

The talks over €3 billion in additional budget cuts in Greece are pointless, Ms. Lagarde wrote. She also criticized Greece’s agreement with the European Union to achieve a budget surplus, not including debt servicing, of 3.5 percent of GDP in the medium and long term. This goal, she argued, needed to be adjusted downward to 1.5 percent.

“Let’s not kid ourselves,” Ms. Lagarde wrote. “This higher goal would not only be difficult to achieve. It might even be counterproductive.”

Sources in Brussels told Handelsblatt they don’t expect the euro zone finance ministers to release billions in new tranches from the aid program at their special meeting on Monday. Instead, they expect the negotiations over further aid to drag on until the regular meeting of euro finance ministers on May 24.


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The financial community also expects little to come out of Monday’s euro zone meeting.

“Euro finance ministers are unlikely to release the next tranche of bailout credit yet at their special meeting today,” Christoph Weil, an analyst with Commerzbank wrote in an economic briefing. “But the Greek government has nevertheless taken the biggest hurdle. Last night, it pushed pension and tax reform through parliament.”

Greece has been protected from bankruptcy with international loans since 2010. The country’ economic woes disappeared briefly from the world stage, eclipsed by Europe’s refugee crisis, terrorist attacks and growing fears of Britain’s upcoming referendum on whether to stay in or exit the European Union.

Now economists, politicians and investors are speaking again about uncertain times for the debt-ridden southern European country. And views vary wildly on how best to put the country back on solid economic and financial footing.

Christian Lindner, the leader of the right-of-center Free Democratic Party, renewed calls for Greece to leave the euro zone.

“Greece needs a new financial start without the euro,” he said in an interview with the Bild newspaper over the weekend.


Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. John Blau is a senior editor at Handelsblatt Global Edition. To contact the authors: and

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