Merkel Backs Greece in Debt Crisis

German Chancellor Angela Merkel giving a joint press conference with Greek PM George Papandreou in February. Photo by EPA/BGNES

German Federal Chancellor Angela Merkel has spoken out against speculations that Greece will not be able to pay out its state debts.

"We are not doing Greece a favor by speculating about the outcome of reforms and whether the country will be able to deal with its public debt," stated Merkel at a press conference Tuesday.

Monday the Standard and Poor's agency cut Greece's rating to B from BB- and warned it could go lower because of a rising probability that the country would have to restructure its debt.

"In our view, there is increased risk that Greece will take steps to restructure the terms of its commercial debt, including its previously-issued government bonds," the agency said in a statement.

S&P said euro zone countries would likely want private holders of Greek government debt to extend bond maturities as governments consider easing terms on the EUR 110 B bailout that saved Greece from bankruptcy last year.

At present, auditors from the European Union, the European Central Bank and the IMF are reviewing reform efforts taking place in Greece.

In the past, Chancellor Merkel has been adamant in her criticisms of Greece's fiscal policy and her backing of stern bailout conditions.

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