German government at odds with itself over Greek debt relief

Eurozone finance ministers, the International Monetary Fund and the Greek government failed to hammer out a final deal on Greece's debt relief and chose to postpone a decision for their next meeting in mid-June.

To get the money, the Greek parliament approved pension cuts and tax hikes last Thursday.

Foreign Minister Sigmar Gabriel, a Social Democrat, caused the divergence in views by demanding that the euro zone make a firm commitment on granting debt relief to Greece, effectively criticising conservative Finance Minister Wolfgang Schaeuble's tough stance.

Schaeuble, as well as several International Monetary Fund economists, agree that Greece should demonstrate its ability to decrease its budget deficit and achieve sustainable economic growth by the early 2020s through an economic reform package that would include stricter austerity, improved investment climate, deregulation, and abandonment of the most costly social programmes.

Greece's debt crisis hit the nation's economy in 2010. The IMF says that it will only join if Greece is granted debt relief.

The eurozone-IMF standoff is the final obstacle to Greece unlocking a tranche of bailout funds that will let it repay €7.3m (£6.3bn) of loans due to be paid in July. "There is no excuse for further delay on the issue of the debt relief".

Even though euro-area governments committed past year to a laundry list of potential measures to ease repayment terms on Greek bailout loans after 2018, the degree to which these measures will be implemented is still a subject of contention. The IMF, which has long argued for Athens to be given debt relief, is not financially contributing to the bailout, despite participating in the first two rescue deals.

French Finance Minister Bruno Le Maire, named last week, is joining European Union finance ministers for talks Monday and Tuesday expected to focus on Greece's debt problems.

Both sides agreed yesterday that Greece should be required to hit a hefty budget surplus target of 3.5 per cent by 2018 and for the following five years.

The Eurogroup also said at the time it would consider replacing more costly International Monetary Fund loans to Greece with cheaper euro zone credit and transfer the profits made from a portfolio of Greek bonds bought by euro zone national central banks back to Athens. "We've not reached an overall agreement on that part of the discussion".

Talks are expected to continue over the coming weeks ahead of the next meeting on June 15.

Le Maire attended the Brussels talks after a morning stop in Berlin where he met Schaeuble, with the pair agreeing to speed up eurozone integration.

After the Eurogroup meeting, French finance minister Le Maire said that Germany's role had been "constructive" but that he "would be lying if [he] said that France and Germany have no difference over the sustainability of Greek debt".

The protracted nature of Greece's bailout program has been costly for the country.

More debt relief is also necessary for the European Central Bank to consider Greek bonds in its asset purchases program, which would ease the country's access to bond markets.

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