Germany is in campaign mode with its election to be held in the Fall of 2013. Merkel is loathe to request a Greek write-down, because Bundestag members do not want to explain to their constituents why they voted to give more money to Greece.
Merkel is attempting the guide the process down a middle path. Germany is willing to lower interest rates on Greek loans and lend Greece more money, but it will not write-down the debt.
The Germans claim that a write-down would cost money, take pressure to reform off Greece and set a precedent for Portugal, Ireland and Spain to request write-downs.
Whatever deal is reached, Greece will eventually default. The eurozone should just get on with the write-downs, because these loans are never being repaid anyway.