BERLIN — Germany no longer rules out the possibility of forgiving Greece some of its debt once the country's finances are in order, Chancellor Angela Merkel said, signaling a softening of her government's stance on Greece.
The question of debt forgiveness, or a "haircut," can be revisited after the current bailout program is successfully concluded and the government in Athens no longer takes on new debt, Merkel said in an interview with the German Sunday tabloid Bild am Sonntag.
Merkel's government had ruled out forgiving debt, arguing that Greece must implement the agreed-upon austerity measures and structural reforms in return for its bailout loans. But the International Monetary Fund and many economists say eurozone nations must also forgive Greece some of its debt to allow the country to overcome its debt crisis.
Greece is trapped by an unsustainable debt level — forecast to reach 190 percent of the country's economic output next year — which forces it to drastically slash its budget. That, in turn, deepens the country's recession, and makes Greece's debt load rise even more in relation to its gross domestic product.