Public Debt Haircut for Greece?
October 29, 2012 • 9:27PM

In the wake of media leaks this past weekend, about a (not yet official) proposal by the EU Troika that public creditors accept a haircut on Greek debt, both German Finance Minister Wolfgang Schaeuble and Chancellor Angela Merkel's spokesman Steffen Seibert opposed the idea. German Chancellor Angela Merkel's spokesman ruled out today a further debt restructuring, or "haircut," for Greece and said Athens must press on with tough economic reforms. "A new haircut is out of the question for the German government," Seibert told a news conference.

The International Monetary Fund, which is part of the EU-ECB-IMF Troika, has demanded before that official lenders such as Germany should take a "haircut" along the lines of that accepted by private bondholders earlier this year. A haircut would burden Germany, the taxpayer that is, with EU18-20 billion, experts guess. That would be the German share in a haircut which would halve the Greek public debt.

Showing that the German government has no new idea whatsoever, Seibert reiterated Germany's wish to keep Greece in the Eurozone, adding the monetarist mantra that Athens had no other choice than to continue with "painful" (that is, most brutal) austerity measures, allegedly to be able to cut its heavy debt load and improve its economic competitiveness. The "haircut" demanded, rather looks like chopping off the heads of the Greeks.