Germany preparing third financial rescue for Greece
New loan, outlined in a German finance ministry position paper, would be worth €10bn-€20bn, says Der Spiegel magazine
A shopping street in
Athens. Greece may face a financing gap of up to €15bn over the next two
years. Photograph: Yorgos Karahalis/Reuters
Germany has signalled it is preparing a third rescue package for Greece
– provided the debt-stricken country implements "rigorous"austerity
measures blamed for record levels of unemployment and a dramatic drop in
GDP.
The new loan, outlined in a five-page position paper by Berlin's finance ministry, would be worth between €10bn to €20bn (£8bn-16bn), according to the German weekly Der Spiegel, which was leaked the document.
Such an amount would chime with comments made by the German finance minister, Wolfgang Schäuble, who, in a separate interview due to be published on Monday insisted that any additional aid required by Athens would be "far smaller" than the €240bn it had received so far.
"What is sure is that any further aid would be much less expansive than whatever help [has been given] so far," he is quoted as telling the German finance magazine Wirtschaftswoche in what appears to be a calibrated move aimed at preparing public opinion.
The renewed help follows revelations of clandestine talks between Schäuble and leading EU figures over how to deal with Greece, which despite receiving the biggest bailout in global financial history, continues to remain the weakest link in the eurozone.
The talks, said to have taken place on the sidelines of a Eurogroup meeting of eurozone finance ministers last week, are believed to have focused on the need to cover an impending shortfall in the country's financing and the reluctance Athens is displaying to enforce long overdue structural reforms. The lack of progress is at the root of stalled talks between Greece and its "troika" of creditors, the International Monetary Fund (IMF), European Central Bank and EU.
Greece faces a financing gap of up to €15bn over the next two years, according to foreign creditors, which have kept its economy afloat since May 2010. As the EU's powerhouse, Berlin has bankrolled most of the emergency loans to date.
But a German finance ministry spokesman, echoing similar statements by Schäuble, denied that a further restructuring of Greece's staggering debt – this time by public creditors – was also on the cards.
"There is no new situation," said the spokesman referring to previous statements made by Schäuble also rejecting the need for debt relief to be extended to recession-hit Greece.
Most of the debt overhang now haunting the country belongs to European governments and at 176% of GDP – up from 120% of national output at the start of the crisis – is not only a barrier to investment but widely regarded as being at the root of its economic woes.
"They are missing the point: Greece does not need a third bailout, it needs debt restructuring," said the shadow development minister and economics professor, Giorgos Stathakis.
"Even in the IMF, logical people agree there is no way we can have any more fiscal adjustment when the whole thing has reached its limits," he said. "There is simply no room for further cuts and further taxes and that is what they are going to ask for."
He said the assistance was "the wrong thing at the wrong time". Unemployment is nudging 28% – and youth unemployment rate tops 60% – while economic recovery is still far from assured, despite the nation outperforming targets with the achievement of a primary budget surplus in 2013.
The IMF has been increasingly at odds with Germany and other lenders over the need to write off Greece's debt. Confidential records, documenting minutes of meetings held to discuss the country's first bailout, reveal the level of discord among member states over the feasibility of the rescue programme. The IMF said last year that without additional debt relief by eurozone governments, Greece's debt burden could smother the country's economy.
China, Brazil, Argentina, India, Egypt and Switzerland have been among the countries expressing grave doubts that the assistance would work, arguing that Greece might end up worse off after the austerity programme.
The new loan, outlined in a five-page position paper by Berlin's finance ministry, would be worth between €10bn to €20bn (£8bn-16bn), according to the German weekly Der Spiegel, which was leaked the document.
Such an amount would chime with comments made by the German finance minister, Wolfgang Schäuble, who, in a separate interview due to be published on Monday insisted that any additional aid required by Athens would be "far smaller" than the €240bn it had received so far.
"What is sure is that any further aid would be much less expansive than whatever help [has been given] so far," he is quoted as telling the German finance magazine Wirtschaftswoche in what appears to be a calibrated move aimed at preparing public opinion.
The renewed help follows revelations of clandestine talks between Schäuble and leading EU figures over how to deal with Greece, which despite receiving the biggest bailout in global financial history, continues to remain the weakest link in the eurozone.
The talks, said to have taken place on the sidelines of a Eurogroup meeting of eurozone finance ministers last week, are believed to have focused on the need to cover an impending shortfall in the country's financing and the reluctance Athens is displaying to enforce long overdue structural reforms. The lack of progress is at the root of stalled talks between Greece and its "troika" of creditors, the International Monetary Fund (IMF), European Central Bank and EU.
Greece faces a financing gap of up to €15bn over the next two years, according to foreign creditors, which have kept its economy afloat since May 2010. As the EU's powerhouse, Berlin has bankrolled most of the emergency loans to date.
But a German finance ministry spokesman, echoing similar statements by Schäuble, denied that a further restructuring of Greece's staggering debt – this time by public creditors – was also on the cards.
"There is no new situation," said the spokesman referring to previous statements made by Schäuble also rejecting the need for debt relief to be extended to recession-hit Greece.
Most of the debt overhang now haunting the country belongs to European governments and at 176% of GDP – up from 120% of national output at the start of the crisis – is not only a barrier to investment but widely regarded as being at the root of its economic woes.
"They are missing the point: Greece does not need a third bailout, it needs debt restructuring," said the shadow development minister and economics professor, Giorgos Stathakis.
"Even in the IMF, logical people agree there is no way we can have any more fiscal adjustment when the whole thing has reached its limits," he said. "There is simply no room for further cuts and further taxes and that is what they are going to ask for."
He said the assistance was "the wrong thing at the wrong time". Unemployment is nudging 28% – and youth unemployment rate tops 60% – while economic recovery is still far from assured, despite the nation outperforming targets with the achievement of a primary budget surplus in 2013.
The IMF has been increasingly at odds with Germany and other lenders over the need to write off Greece's debt. Confidential records, documenting minutes of meetings held to discuss the country's first bailout, reveal the level of discord among member states over the feasibility of the rescue programme. The IMF said last year that without additional debt relief by eurozone governments, Greece's debt burden could smother the country's economy.
China, Brazil, Argentina, India, Egypt and Switzerland have been among the countries expressing grave doubts that the assistance would work, arguing that Greece might end up worse off after the austerity programme.
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