Greek debt write-off 'not enough'

It may be necessary to write off some of Greece’s debt, but that it is not an overall solution to the country’s economic problems, the head of Germany’s central bank has said.

Bundesbank President Jens Weidmann told Bild newspaper that the need for a Greek “haircut” – in which the country’s government pays back less than what it owes to bondholders – could not be ruled out.

“But that will not solve the cause of the problems. Greece must get a grip on its state sector and make its economy competitive – a debt forgiveness must not become an attractive way out of self-inflicted problems.”

Mr Weidmann was also critical of the European Central Bank’s recent purchases of bonds from troubled countries, saying “we’re at best buying time, taking risks, but not solving the real problem”.

When asked how much time could be bought, he said “not too much”.

European officials are trying to keep Greece’s financial troubles from triggering a wider banking collapse.

Eurozone officials plan to push banks to add to their financial cushions in case Greece cannot repay its debts, which would mean losses on bank holdings of the country’s government bonds.