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Merkel Does Not Rule Out Forgiving Some Greek Debt After 2014

German opposition leaders and analysts have accused Merkel of playing down the need to write off some of Greece's debt held by eurozone governments before national elections in Germany next year for fear of voter retribution.

Merkel did not directly address that charge, noting only that Greece's current bailout programs runs through 2014, hinting that she sees no need for yet new measures before then.

The hawkish head of Germany's central bank, Jens Weidmann, last month said that Greece will eventually need a haircut, but it should only be granted after a prolonged period of budgets cuts and labor reforms there.

Earlier this year, Greece reached a deal with its private creditors to wipe some 100 billion euros ($130 billion) off its national debt, or about half of the country's GDP.

Still, a second haircut on Greece's debt from the eurozone rescue loans might be necessary. Analysts say such a haircut could cost Germany, the main contributor to the bailouts, up to 17 billion euros ($22 billion) -- more than 5% of Berlin's annual budget.

Merkel's comments came only two days after Germany's parliament voted in favor of granting Greece more lenient terms on its bailout program, clearing a necessary hurdle for disbursing a 44 billion euro ($57 billion) rescue loan payment in December that Athens needs to avoid bankruptcy.

___

Juergen Baetz can be reached on Twitter at http://www.twitter.com/jbaetz

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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