By TraderVox.com
Tradervox.com (Dublin) – Angela Markel, the German Chancellor, has indicated that she is open to the possibility that Germany may accept a proposal to write-off Greek debt. The policy makers in the euro area met last week to discuss buyback measures that are crucial for the Greek government to receive more funding. The meeting which agreed on lenient terms for the country had indicated that the Greece government had done a lot to secure the funding.
Merkel signaled that the euro leaders are considering writing off debt once the country has a budget surplus. She added that if Greece comes to a point where it relies on its own revenue and does not have to borrow, the leaders would have to reevaluate the situation once again. However, she noted that this will not happen in the coming three years according to the plan that is laid out. According to Carsten Brzeski, a Brussels-based economist at ING Group, Merkel’s remarks shows openness that marks “the end of denial.” He indicated that while this marks a remarkable shift, it is also very obvious, hence making her remarks expected.
European finance ministers agreed last week to give Greece more time to meet its debt targets which has alleviated the situation in euro area. The Spanish bonds made the third monthly gain in a row, with yields declining last week from 5.6 percent to 5.3 percent. The 17-nation currency climbed by 2 percent in two weeks. The Greek buyback measures, which will be financed from an earmarked 10 billion euros from the current rescue package, is at the center of the proposed measures in scaling back Greek debt load to sustainable levels.
According to Wolfgang Schaeuble, the German finance minister, the complex buyback measure accounts for eleven percentage points of the drop from 144 percent of Greece debt, if the measures were not introduced, to 124 percent set by the finance ministers.
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