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Rösler: No more debt cuts for Greece

Germany's economy minister said on Friday that Greece should not have its huge debts cut any further, in an attempt to hold onto newly won trust in the Eurozone.

Published: 9 August 2013 13:02 CEST

Rösler: No more debt cuts for Greece

Photo: DPA

Philip Rösler, also head of the country’s junior coalition partner party the Free Democrats (FDP), made it clear that Germany would not be letting Greece off any more of its debts.

He argued that the financial situation in Greece was considerably better than it was a year ago, and so said he saw “no necessity in further haircuts to debt, as such a step would shake the newly won trust in the Eurozone and remove pressure to reform from other countries in crisis.”

Rösler added that the country’s new government had made noticeable advances in structural reforms to the jobs market.

Privatising parts of the public sector had, he said, helped and had been unavoidable.

Yet economic experts disagreed with Rösler and maintained that there would in fact be further debt cuts in store for Greece. German would likely see itself slashing the money Greece owes by billions of euros, they said.

DPA/The Local/jcw

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Italian Prime Minister Mario Draghi

Italian Prime Minister Mario Draghi expects the country's GDP to recover in the coming year. Photo: Alessandra Tarantino / POOL / AFP

“The economy is bouncing back from the recession, driven by a rebound in demand across Europe,” EU executive vice-president Valdis Dombrovskis said.

“But we are not out of the woods yet. The economic outlook remains riddled with uncertainty,” he said, warning that the coronavirus is still spreading, prices are rising and supply chains face disruption.

Despite these unpredictable threats, European officials predict a strong recovery, and want eurozone governments to maintain their “moderately supportive fiscal stance” to support investment.

EXPLAINED: How Italy’s proposed new budget could affect you

Italy, however, remains a worry. Its public debt passed 155 percent of its GDP last year, and Brussels is worried that it is still budgeting to spend too much next year.

“In order to contribute to the pursuit of a prudent fiscal policy, the Commission invites Italy to take the necessary measures within the national budgetary process to limit the growth of nationally financed current expenditure,” the commission report said.

The commission did not say by how much Italy’s spending plans should be reduced, and its recommendation is not binding on the government.

The European Union suspended its fiscal discipline rules last year, allowing eurozone members to boost their public spending to help their economies survive the Covid-19 pandemic.

But the European commissioner for the economy, former Italian prime minister Paolo Gentiloni, said governments should now “gradually pivot fiscal measures towards investments”.

“Policies should be differentiated across the euro area to take into account the state of the recovery and fiscal sustainability,” he said.

“Reducing debt in a growth-friendly manner is not necessarily an oxymoron.”

Italian Prime Minister Mario Draghi, a former European Central Bank chief, has said Italy’s economy is recovering after the pandemic-induced recession.

Draghi forecast economic growth this year of “probably well over six percent” in a statement on October 28th.

Italy’s GDP rate grew by 2.6% in the third quarter of 2021.

While economists don’t expect Italian GDP to bounce back to pre-pandemic levels until 2022, ratings agency Standard & Poor has revised its outlook for Italian debt from stable to positive.

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