Merkel refuses to soften rescue terms despite GDP collapse fears

Tim Wallace
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THE GREEK recession is getting deeper, ratings agency Fitch warned yesterday, underlining the need for the country to ease its tough austerity programme and renegotiate some of the terms of its EU bailout.

Fitch believes there may be some room to cut the interest rate on the loans to the government – under the plan as it stands the state will pay around €6bn (£4.8bn) per year to the Eurozone – or to extend the time period over which the loans must be paid back.

But German Chancellor Angela Merkel yesterday shattered hopes of even a minor renegotiation, arguing that the government must press on with spending cuts and economic reforms.

There is “no leeway” on the issue, she said at the G20 summit in Mexico, insisting any government that is formed must “stick with the commitments that have been made.”

Hopes had earlier been raised when Merkel’s foreign minister Guido Westerwelle hinted that the time frame of the bailout could be extended.

However, officials later denied this was official policy, saying Westerwelle’s comments had “not been agreed” and that a renegotiation “is not on the table”.

Fitch said that the establishment of a pro-bailout government in Greece will remove the imminent risk of a euro exit, but warned “the severity of the systemic crisis engulfing the Eurozone is unlikely to diminish” until leaders come up with a solid plan for “much greater fiscal and financial integration”.