BERLIN (Reuters) - Germany's opposition Social Democrats demanded that Chancellor Angela Merkel come clean about the risk of losses on government loans to Greece before a looming election, after the IMF said Athens may require additional debt relief as early as next year.
Carsten Schneider, budget expert for the SPD in parliament, accused Merkel and her Finance Minister Wolfgang Schaeuble of being dishonest with voters by trying to push back a discussion of Germany's exposure to Greece until after the September 22 vote.
Back in December, euro zone finance ministers said "additional measures" may be required to ensure Greece meets a goal of bringing its debt down to 124 percent of gross domestic product (GDP) by 2020, but the details were left vague.
In comments on Wednesday, International Monetary Fund economist Paul Thomsen offered specifics, saying European governments had committed to additional debt relief if Greece's primary budget balance fell short of target in 2013 or 2014.
He did not specify what that relief might look like. Greece's EU partners could, for example, lower the interest rates on the loans or stretch out the maturities, both steps they have taken in the past to alleviate the load on Athens.
But some debt experts believe Europe will have no choice but to go further and accept an outright "haircut" on the value of bailout loans to Greece if the country is to make a successful return to the capital markets.
An open debate about loan losses could damage Merkel in the run-up to the vote. She is favored to win a third term in the election, in large part because voters believe she has shielded them from such losses during the debt crisis that first erupted in Greece in late 2009.
"The chancellor and the finance minister need to stop leaving the public in the dark about the fact that after the election there will have to be official debt forgiveness for Greece," Schneider said on Thursday.
"The chancellor has said Greece should stay in the euro. Now she has to say what this promise will cost. The truth must come out before the election."
Private owners of Greek debt were forced to swallow significant losses on their holdings last year, but European governments and the European Central Bank, which bought up Greek bonds at the height of the crisis, have refused to take a hit.
Germany has insisted a writedown of Greek debt held by euro zone governments would be illegal, although Schaeuble suggested late last year that such losses might be considered once Greece achieves a primary surplus.
With an eye on the election, lawmakers from Merkel's own Christian Democrats (CDU) warned on Thursday against launching a debate now over debt forgiveness.
"We have clear agreements, including with the IMF, on aid for Greece," Michael Meister, deputy CDU leader in parliament, told Reuters.
"These do not foresee a haircut on the debt. It must be clear to anyone who speaks about a haircut that this risks endangering the entire aid package."
Reporting by Noah Barkin, Andreas Rinke and Gernot Heller; Editing by Stephen Brown