According to Clemens Fuest and Marcel Fratzscher, the respective presidents of the German economic research institutes ifo and DIW, Greek debt relief has no chance of getting through even after the general election in September. The idea of linking growth to the level of repayment, as suggested by the Macron government, does not look possible either.
“Greece does not need a restructuring of its debt.” The situation is clear for Clemens Fuest, the president of the Munich institute of economic research, ifo, and reputedly close to the employers and the CDU. During a colloquy organised by the German and French research institutes, he provided assurances that “there is nothing objective to say that Greece needs this more than other countries”. He pointed out that the level of Greek debt was higher but the interest rates are much lower than elsewhere.
Marcel Fratzscher, the President of the DIW, the German institute for economic studies in Berlin and reputedly closer to the SPD, said that debt relief had “no chance” of being approved by the German parliament and government elected on 24 September next.
He already doubted that the agreement concluded by the Eurogroup on Thursday 15 June (see other article) for another loan worth €8.5 billion was in line with the “deal” concluded between the government and Bundestag.
This pact called for prior agreement between the IMF on its participation in the rescue plan for Greece, then release of the plan and “not the reverse”, he pointed out. While the very low interest rates effectively resemble debt relief, the German government has no margin for projecting it as such, the economists believe.
At least the economists agree on one point: the need to release Greece from international oversight.
Clemens Fuest stated: “It is time that the Greek parliament and government are given more room for manoeuvre so that they can outline their own reform programme”. He admitted, however, that, “the feeling of being governed from outside has a negative impact on the population and the perception of private investors”.
To help give them this “ownership”, it could prove beneficial to link the level of repayment of Greek debt to growth, as proposed by France and accepted by the Eurogroup, said Fratzscher. He provided assurances that, “according to our calculations, such a model would be in the interest of the two parties if 20% of tax revenues were linked to growth and helped to repay the interest rates”.
Some CDU part of the coalition government, however, do not appear prepared to make a step in this direction. (Original version in French by Nathalie Steiwer)