Germany has signaled it is preparing a third rescue package for Greece — provided the debt-stricken country implements “rigorous” austerity measures.
The new loan, outlined in a five-page position paper by Berlin’s Ministry of Finance, would be worth between 10 billion euros and 20 billion euros (US$13.48 billion to US$26.96 billion), according to Der Spiegel, which has leaked the document.
Such an amount would chime with comments made by German Minister of Finance Wolfgang Schauble, who, in a separate interview due to be published on Sunday, insisted that any additional aid required by Athens would be “far smaller” than the 240 billion euros 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 Schauble 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 IMF, the European Central Bank and the EU.
Greece faces a financing gap of up to 15 billion euros 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.
However, a German finance ministry spokesman, echoing similar statements by Schauble, 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,” the spokesman said, referring to previous statements made by Schauble also rejecting the need for debt relief to be extended to Greece.
Most of the debt overhang now haunting the country belongs to European governments and at 176 percent of GDP — up from 120 percent 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,” Greek shadow development minister and economics professor Giorgos Stathakis said.
“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 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.”
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 doubts that the assistance would work, arguing that Greece might end up worse off after the austerity program.