Greek bid for debt forgiveness 'divorced from reality', says Germany

Germany has rejected any suggestion that Greece should be forgiven part or all of the debt it owes to international lenders.

Greek bid for debt forgiveness 'divorced from reality', says Germany

Germany has rejected any suggestion that Greece should be forgiven part or all of the debt it owes to international lenders.

The radical Syriza party won general elections over the weekend with pledges that included seeking forgiveness of more than half of Greece’s the debt.

But a spokesman for Germany’s Finance Ministry said that “the discussion about a debt cut or a debt conference is divorced from reality”.

Martin Jaeger told reporters in Berlin that Greece must abide by the terms of the bailout programme agreed by previous governments or endanger the bailout programme.

He added that “if the measures announced by the new government in Athens were implemented, then one has to ask whether the basis of the programme wouldn’t be called into question and therefore pointless”.

A top eurozone financial official is in Athens for talks with Greece’s new left wing government after it promised to renege on key commitments required in exchange for a €240bn rescue package.

Jeroen Dijsselbloem, the Dutchman who chairs eurozone finance meetings, met with Prime Minister Alexis Tsipras and was due to have a lengthier meeting with the finance minister, Yanis Varoufakis.

Syriza has promised to break off talks with bailout negotiators from the troika - the European Commission, European Central Bank and International Monetary Fund - and seek talks directly with eurozone governments to try and cancel more than half the bailout debt.

The loans are from eurozone countries and the IMF.

European officials have already said they expect Greece to repay the money in full.

But credit ratings agency Fitch said that, in the short term, both sides have a “strong incentive” to reach an agreement to make sure Greece gets the rescue money from the bailout programmes.

It warned, however, that drawn-out negotiations pose a “high risk” to the country’s fragile economy.

“The content of any settlement is hard to predict,” it said. “There is a high risk that protracted and difficult negotiations will sap confidence and liquidity from the Greek economy.”

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