So far, German Finance Minister, social-democrat Olaf Scholz had barely revealed his intentions regarding Greece and the euro zone reform. But now official papers disclose the first indications about the policy Berlin will follow. “Much sounds like his predecessor, Wolfgang Schaeuble,” writes German economic news daily Handelsblatt,that has obtained a ministry document about Greece.
The Finance Ministry in Berlin lowered expectations on Wednesday that Greece and its euro zone creditors could soon reach an agreement on debt relief after Athens far exceeded lenders’ budgetary demands in 2017.
A document obtained by Handelsblatt shows that Olaf Scholz was against a proposal to grant debt relief for Greece if its economic growth should drop below a certain level.
Citing a Finance Ministry document ahead of the meeting of euro zone finance ministers on Friday, the newspaper said that Greece should not be entitled to such a debt relief mechanism without strict conditions.
“Weak growth would therefore not automatically entitle Greece to reduce its debt service payments,” the Finance Ministry said, according to Handelsblatt.
The conditions would include that Greece must stick to the jointly agreed budget rules of the euro zone, the report said.
Many euro zone officials are worried that as time passes, Greek politicians will be under increasing pressure to loosen budget strings again, so they are seeking ways to make it worth Greece’s while to be fiscally prudent as long as possible, reuters notes.
Officials say a well-designed offer of further debt relief for Greece could provide an incentive for Athens not to stray from the agreed reform path and keep a high primary budget surplus – the balance before debt servicing costs – of 3.5 percent of GDP, until at least 2022.
PS at the end of the day it will be confirmed that German policy towards Greece is a state policy and has little to do with who is sitting on the finance ministry chair. It’s the same with Turkey: claiming Greek islands is state policy and had nothing to do with whether Islamists or Kemalists are on power.