Greek haircut talk a ‘useless’ distraction, Finnish PM says

The prime minister of Finland railed against suggestions that Greece’s only road to recovery might be to force creditors to accept a cut in what’s owed them.

The comments follow a report by the International Monetary Fund showing the Washington-based lender sees Greece needing debt relief “far beyond” terms agreed to by European leaders, including the possibility of debt reduction, or so-called haircuts. German Finance Minister Wolfgang Schaeuble has told local radio he doesn’t know how to proceed “without a haircut.”

Such talk is “useless,” Prime Minister Juha Sipila said in an interview on Thursday. “The most important thing right now is that the debt load stops increasing.”

In a piece of analysis released this week, the IMF estimates that Greece’s debt will peak at close to 200 percent of gross domestic product in the next two years. As recently as July 2, the fund said nominal gross public debt was on track to reach about 170 percent of GDP by 2017. Debt has continued to swell after two Greek bailouts, with creditors now preparing to discuss a third package.

But Finland, together with Germany and the Netherlands, has been staunchly opposed to allowing Greece further concessions. Sipila said an agreement struck on Monday between Greece and its creditors that paves the way toward talks for a third bailout didn’t require much compromise from his government.

“Finland succeeded very well in pushing through its most important points,” Sipila said. “Now, Greece must show its clear commitment to these reforms and implement them.” The country’s “track record is very bad,” he said.

The Finnish parliament’s Grand Committee on Thursday gave Sipila’s administration the go-ahead to start talks on a third Greek bailout. A poll published in the Aamulehti newspaper on Friday showed 57 percent of Finns don’t want their government to agree to another bailout.

Meanwhile, Nordic governments outside the euro zone threw their support behind bridge financing needed to keep Greece solvent over the coming days and weeks.

“I think, to be quite honest, that we owe this small contribution,” Danish Finance Minister Claus Hjort Frederiksen said in an interview with broadcaster TV2. “We owe the Greek people a way out of the morass they’ve now been stuck in for years.”

[Bloomberg]