German Finance Ministry: Debt relief would de facto be a new loan for Greece

German Finance Ministry ‘contemplated’ on debt relief for Greece. And came to the conclusion that should the interest payments put back until 2048, ‘it would de facto be a new loan with a volume that depends on the development of interest rates.” This is estimated 118 to 123 billion euros.

The German finance ministry captured its thourhgts in a letter an sent to a member of the parliament. Reuters obtained the paper.

A Greek debt relief scenario that put back interest payments until 2048 would mean the nation’s euro zone creditors deferring receipt of up to 123 billion euros ($138.7 billion), according to a forecast by Germany’s Finance Ministry.

The ministry’s calculations, which were contained in a letter to a member of parliament seen by Reuters on Friday, contemplated the various restructuring scenarios laid out by the euro zone bailout fund, the European Stability Mechanism (ESM).

“With such an interest deferral, it would de facto be a new loan with a volume that depends on the development of interest rates,” the document said. “The estimated volume of the deferred interest up until 2048 would be around 118-123 billion euros.”

The International Monetary Fund (IMF) says it cannot contribute loans to Greece’s current bailout unless it gets assurances that its debt will be sustainable.

The Fund has estimated that the Greek economy will only grew by 1 percent per year on average and that Greece will return to a primary surplus of 1.5 percent from 2023 after five years at 3.5 percent.

Greece needs about 7 billion euros in loans from its 86-billion euro rescue package to repay debt maturing in July, but the disbursement hinges on its lenders’ assessment of its bailout progress, the conclusion of the so-called second review.

The Finance Ministry declined to comment specifically on the paper, Reuters notes.

Insisting on the hostile attitude towards Greece, Berlin sent the message to Athens threatening of a repetition of the 2015 negotiations. According to private ANT1 TV, a high-ranking official in the German finance ministry said “there will be not debt relief solution the way Greece wishes for.” And warned: “Athens should be careful in order to avoid the situation of 2015. If Athens goes for clash, it will lose.”