German chancellor's comments likely to bolster critics who accuse her of concealing the full cost of Greece's latest aid deal
Angela Merkel has given her clearest signal yet that eurozone governments may have to take losses on the Greek debt they own, but only if Athens sticks to a painful programme of economic reforms.
Fresh from a bruising victory in the Bundestag over Greece's aid plan, the German chancellor told the Bild am Sonntag newspaper that a "haircut" could be considered for Greece in two years.
"If Greece one day again manages with its revenue without getting new debt, then we must look at and assess the situation," she said. "That is not the case before 2014-15 if everything goes according to plan."
The comments may bolster her critic who claim that she has concealed the full cost of Greece's latest aid deal.
Merkel added that she was also pushing for tougher sanctions on eurozone members who failed to meet budget targets to be agreed with the European commission (EC), as part of the push for closer fiscal ties within the single currency region.
Merkel's authority as chancellor took a knock on Friday when 23 members of her coalition voted against a motion approving a two-year extension to Greece's aid programme, and the advance of €44bn of loans to Athens. But the support of MPs from other parties meant it passed comfortably.
Eurozone finance minister are due to discuss the aid programme on Monday at a meeting in Brussels, where Greece's Yannis Stournaras will present details of a bond buyback scheme that must succeed before Athens receives its next tranche of rescue funding.
Last week saw some progress in the eurozone crisis, with ministers finally reaching agreement on Greece and the EC approving a €37bn restructuring of Spain's banks. Experts warn that the crisis will continue to rumble on this week.
"It is unlikely that any sustainable solution to the Greek problem will be found," said Sony Kapoor of the Re-Define thinktank. "While progress will be made in Spain we will not be hearing the end of problems in Spanish banks anytime soon."
Spain's prime minister admitted over the weekend that Madrid might miss its deficit targets for 2012. Mariano Rajoy told the La Razon newspaper that cutting borrowing to 6.3% of GDP this year was "very complicated" and "very difficult", adding: "Our goal is to do things well and we will see what will happen at the end of the year."
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