Greek creditors will inevitably be taking a haircut, claims Dr. Marcel Fratzscher, the President of the German Institute for Economic Research (DIW), because its current level of debt is unsustainable. Fratzscher, who is an unofficial advisor to Chancellor Angela Markel, made his comments to newspapers of the Funke group.
No matter how the problem is addressed, “The issue is whether this ‘haircut’ will be decided in the next few months or if it will be later,” Fratzscher said, adding that he is in favour of linking loan interest rates with economic growth in order to motivate the Greek government to undertake needed reforms. But he believes there’s now only limited danger of Greece leaving the euro, because most people in Europe, and increasingly in Germany, see the currency as a source of strength for Greece rather than a liability.
