Merkel not currently considering Greek debt ‘haircut’

German Chancellor Angela Merkel on Monday said she did not currently want to consider a so-called “haircut”, or write-down, on Greek debt, an idea she had hinted at a day earlier.

“It is important that we don’t consider now the prospect of a partial cancellation of (Greek) debt, because all of our efforts would immediately come undone,” she told German television in an interview in Hanover, where her conservative Christian Democratic Union party is meeting this week.

In an interview on Sunday, Merkel had said for the first time that a haircut could be considered from 2014 if Greece’s financial situation improves.

“If Greece one day again manages with its revenue without getting new debt, then we must look at and assess the situation. That is not the case before 2014/15 if everything goes according to plan,” she told the Bild am Sonntag newspaper.

Merkel on Monday said no one knew what Greece’s financial situation would look like in 2015.

“I just know one thing today, and that’s that Greece must follow its journey of reforms, even if this is very painful,” she said.

The possibility of a Greece debt write-down is particularly sensitive in Germany, with less than a year until elections.

On Friday, Merkel secured the vote from German lawmakers to release 43.7 billion euros ($56.9 billion) in aid to debt-wracked Greece agreed after tortuous talks between eurozone finance ministers.