German minister: Greece needs third bailout

Germany’s finance minister admitted for the first time yesterday that Greece would need a third aid package, as a source in Athens said the sums involved in any new deal would be far smaller than previous rescues.

“There will have to be another programme in Greece,” Wolfgang Schaeuble told a campaign audience in northern Germany, in comments that raised the prospect of a step that could be deeply unpopular domestically just five weeks before national elections.

In Athens, a Greek finance ministry official said a new bailout would focus on plugging an expected funding shortfall over 2014- 2016.

“Greece and its lenders are examining several ways to plug any funding gap that Greece will face over the next few years,” the official said.

The measures included using leftover funds from a bank bailout programme and previously discussed debt support measures, the official said.

In Frankfurt, the ECB said executive board member Joerg Asmussen would visit Greece to discuss progress on reforms needed to ensure more bailout money.

Mr Schaeuble’s comments go beyond any utterances from chancellor Angela Merkel, tipped to win a third term in the Sept 22 election, who has taken a more cautious line on Greece to avoid angering voters who fear they will have to foot the bill for Athens.

Mr Schaeuble has said in the past that international lenders may have to consider a new aid programme for Greece after the existing one runs out at the end of 2014, but he has never described this as inevitable, as he appeared to do yesterday.

He added that there would be no further debt haircut for Athens.

Greece got an aid tranche of €5.8bn from its international lenders — the euro area, its national central banks and the IMF — in July and stands to receive another €1bn in October, subject to implementation of further reforms.

The troika will return to Athens in the autumn to find out whether the government needs to find further savings to meet its 2015-2016 budget targets.

As a prelude to that, Mr Asmussen will this week meet Central Bank governor George Provopoulos, finance minister Yannis Stournaras and George Zanias, chairman of Greece’s biggest lender, National Bank, Greek sources said.

Progress on reform in the recession-stricken country has been patchy and there have been several reports that Greece needs more debt relief to get back to a more sustainable financial position.

Earlier this month, the German government, one of Greece’s biggest creditors, dismissed a report by Der Spiegel magazine, which quoted a document that said Europe “will certainly agree a new aid programme for Greece” and that the existing aid package carried “extremely high” risks.

As Europe’s biggest economy, Germany takes the biggest share of bailouts.

Merkel again tried to quash speculation about Greece in an interview with the Ruhr Nachrichten newspaper yesterday.

“No, I don’t expect a new haircut for Greece. We are moving ahead step for step. There is no question that a lot has to change in Greece. But we also see clear progress and recognise this,” she was quoted as saying.

“In the eurozone, we always said that we would evaluate the Greek situation again at the end of 2014 or in early 2015. It makes sense to stick to this timeline.”

France, a crucial partner for Germany within the EU, has stressed that Greece is heading in the right direction. “It seems to me that this programme is on track,” French finance minister Pierre Moscovici told Inter radio. “I don’t see an urgent need for a new aid plan for Greece.”

Reuters