German economist warns Greece will never repay loans

Germany would likely never again see any loans it might provide to debt-wracked Greece, a top economist said yesterday, as Chancellor Angela Merkel prepared to host a series of talks on the crisis.

Merkel was poised to meet, among others, the managing director of the International Monetary Fund, Dominique Strauss-Kahn, as she weighed whether to contribute to a bailout of Greece that is deeply unpopular with voters.

In comments likely to fuel increasing public sentiment against Greece, the head of one of Germany's top economic institutes warned that Athens would not pay Berlin back and a bailout would only prompt more demands for German cash.

Asked on MDR radio if Germany would ever get its money back, Hans-Werner Sinn, head of the Ifo institute and one of the top advisors to the government, said: "To tell you the truth, no."

Greece "will not be in a position to carry out the necessary budgetary rigour" and will eventually have "to ask for Germany to waive the debt," he said.

"It would be understandable if the Italians or the Spanish put pressure on us to pay up now because it is an important precedent for them," added the economist.

With a key regional election on May 9, Ms Merkel has at least one eye on public opinion, which suggests opposition to helping Greece is hardening.

Independent polling institute Allensbach said 65 per cent of Germans are against supporting Athens, whose 10-year bond yield hit ever higher records yesterday as the markets bet Athens would be forced to default on its debt.

The survey, published in the daily Frankfurter Allgemeine Zeitung, suggested that the German people shared Sinn's fear of contagion.

Three out of five surveyed said that a similar crisis to that raging in Greece could occur in another eurozone country, pointing in particular to Spain, Portugal, Italy and Ireland.

The crisis is also affecting Germans' view of the European Union.

According to the survey, only 20 per cent of people think the EU has brought more advantages than disadvantages, with 28 per cent believing the reverse. Forty-two per cent said the upsides and downsides were balanced.

Nevertheless, more than eight years since the euro first came into their pockets, the Germans, so reluctant to give up their beloved and strong deutschmark, are becoming more and more used to the currency.

The survey showed that 47 per cent of people would rather have the deutschmark back, down from 61 per cent when euro notes and coins were introduced in 2002.