Germany's Merkel says Greece can't have debt haircut in euro zone

BERLIN (Reuters) - Chancellor Angela Merkel said on Tuesday that a debt haircut for Greece was not possible so long it remains in the euro zone, adding that Germany wanted a quick conclusion of a bailout review.

German Chancellor Angela Merkel gestures during a cabinet meeting at the Chancellery in Berlin, Germany, March 23, 2016. REUTERS/Fabrizio Bensch

Merkel spoke after meeting IMF chief Christine Lagarde. The IMF has fought shy of participating in the bailout without a firm promise of debt relief for Greece from the EU.

Germany, while keen for the IMF to take part, has said relief cannot be discussed until Athens has demonstrated compliance with the terms of the bailout.

“It is not a demand of the federal government to have no debt haircut but rather in our opinion this is legally not possible in the euro zone,” Merkel told reporters in Berlin after meeting International Monetary Fund head Christine Lagarde and other global economic leaders.

“The German position is that the IMF takes part in an agreement ... We want a quick conclusion of these talks,” Merkel added.

Prime Minister Alexis Tsipras hopes a successful review, which will unlock an estimated 5 billion euros in bailout funds, will pave the way for talks on debt relief and convince austerity-weary Greeks that their sacrifices are paying off.

The 5 billion euros are needed to repay loans from the International Monetary Fund and maturing bonds to the European Central Bank, as well as unpaid domestic bills.

Greece signed up to a bailout worth up to 86 billion euros in 2015, its third international financial lifeline since 2010, which hauled it back from the brink of leaving the euro zone. So far, it has received 21.4 billion of an initial 26 billion euro tranche.

Lagarde said the IMF is “determined to continue to help” on Greece.

On Sunday, she denied that IMF staff would push Greece closer to default after the leak of a transcript in which IMF officials apparently mooted scare tactics to secure a deal.

“We are engaged, we are working together, we had a really good discussion earlier on today with the chancellor, and we are determined to continue to help,” the IMF chief said in Berlin.

Lagarde said that what was needed in Greece was “long-term sustainability, and debt sustainability for Greece is going to matter for private sector investors.

“We are clearly not where we want to be and particularly where Greece should be in order to be stable, in order to be prosperous, in order to respond to the Greek population needs,” she added.

Reporting by Joseph Nasr and Paul Carrel; Editing by Mark Heinrich