It is certainly a revolutionary proposal that expected to raise sharp criticism in Germany. Managing Director of the European Stability Fund Klaus Regling has reportedly brought a controversial 2-page proposal to the Eurogroup meeting on Monday. In his proposal, Regling offers that the ESM buy part of Greek debt to the International Monetary Fund in order to avoid that the Greek “rescue” becomes very expensive for the EU countries should the Debt Relief proceeds.
According to conservative German daily DIE WELT that obtained Regling’s proposal, the list of options to reduce the Greek debt burden include:
Extension of loan maturities and a cap in case that interest rates increase possibility that the Euro-partners buy a part of the Greek debt at the IMF
Background for this proposal is that:
Greece pays back older debts to the IMF with an interest rate of 3.5%. Loan from the ESM were certainly much cheaper as the interest rate is below 1% – due to ECB rates policy. Through this option Greece could save a lot of money.
According to Die Welt, “Regling’s proposal is likely to meet with harsh criticism in Germany, then it would mean that the international burden-sharing balance in the Greek rescue program will be changed. Germany and the EU-partners would have to contribute more for the Greek rescue program than before and that the IMF would have profit as it would have get rid of part of the Greek debt.”
“With this revelation, now Schaeuble’s insistence to speak of – and reject – a Greek “haircut” slowly starts to make sense”, keeptalkinggreece.com comments and adds:
“This bitter Finance Minister of Germany would rather see his euro-partner Greece pay higher interest rates to the IMF so he enhance his argument on “Greece would be better outside the Eurozone” dogma as the debt-ridden country would proceed with national currency devaluation. As long as this does not happen, the only solution for Schauble is the permanent internal devaluation of the Greek incomes and lives.”
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