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Greece’s ‘third’ bailout talk shadows ECB visit to Athens

By Harry Papachristou

THE EUROZONE will consider measures to support Greece as long as it implements its latest bailout but has no plans to review the situation before spring next year, European Central Bank executive board member Joerg Asmussen said on Wednesday.

Asked to comment on the German finance minister’s statement that Greece would need a new bailout package, Asmussen said the issue was not discussed at talks with Greek Finance Minister Yannis Stournaras during his visit to Athens.

“We have not discussed this, we have focused on making the current programme a success, more growth and jobs,” he said.

He declined to be drawn into discussion of a third package, saying he had nothing to add to a Eurogroup decision in November last year that pledged additional assistance to Greece until it regained access to financial markets, as long as it implemented its bailout and generated a primary surplus.

Asmussen ‘s visit followed by a day German Finance Minister Wolfgang Schaeuble’s public acknowledgement to an election campaign audience that Greece will need a third bailout.

Greece has already been bailed out twice since 2010 with 240 billion euros worth of deals coordinated by the ECB, European Union and International Monetary Fund.

It had been expected to seek some form of additional debt relief sooner or later to bring its massive debt down to a manageable level, but the openness of the suggestion of a third bailout for Athens came as a surprise.

Asmussen was meeting Greece’s finance minister after holding talks with the central bank governor, as part of discussions on Greece’s stuttering progress on reforms, deficit cutting and shoring up its banks before fresh aid is released in October.

In Berlin, Germany’s finance ministry sought to play down Schaeuble’s bailout comments, saying the eurozone would take a fresh look at Greece’s aid programme in mid-2014 and that Berlin was not aware of any discussions on how to structure a new rescue package.

“We have reached the middle of the current programme. It is August 2013, we will certainly have to look in mid-2014 at where we are, what the conditions are and whether the programme has been fulfilled,” said spokesman Martin Kotthaus.

A Greek finance ministry official speaking to Reuters on condition of anonymity said any further help for Greece would aim to cover its funding shortfall in 2014-2016 and would be much smaller than the previous aid packages, given the country’s limited funding needs for the period.

The International Monetary Fund has put Greece’s uncovered funding needs for 2014-2015 at 10.9 billion euros.

At least part of that stems from national European central banks refusing to roll over some Greek bonds they hold, as well as a potential shortfalls in tax and privatisation revenues and Greece being unlikely to fully return to bond markets next year.

Such estimates are revised frequently and are highly sensitive to budget and economic growth projections, which Greece’s lenders are expected to update in the fall.

Schaeuble’s comments were immediately seized on by Greece’s anti-bailout opposition, who fear that any new aid will be accompanied with yet another round of painful austerity.

“Schaeuble threatens with new help,” leftist newspaper Efimerida ton Syntakton deadpanned on its front page, next to a stern-looking image of Schaeuble with tightly pursed lips.

“They admit they failed and now they want to save us again,” the newspaper said.

Panos Skourletis, spokesman for the Syriza opposition party, said: “Contrary to recent talks about an eventual debt writedown, we are going down the same old road, the same recipe, which inflates debt and turns Greece into a debt colony.”

Syriza shocked established parties in the last two elections by rising a wave of public anger at austerity to become the country’s second largest party.

Greek officials have suggested any funding shortfall could be covered with a combination of new rescue loans, or debt support measures like extending maturities or cutting interest rates on loans, as already envisaged under a euro zone decision on Greece last year.

European Union Monetary Affairs Commissioner Olli Rehn was cited on Wednesday as saying that while new rescue loans in a third bailout were possible, they were not the only option to help Greece and pointed to the option of extending maturities.

The aid programme Schaeuble is expecting will be at least partly financed via the EU budget, German newspaper Sueddeutsche Zeitung cited unnamed sources as saying.

Greece’s international lenders – the EU, ECB, and IMF, known as the troika – are due to return to Athens in the autumn to reexamine whether Greece’s debt is on sustainable footing and whether the government needs to find further savings to meet its 2015-2016 budget targets.

Progress on reform in the recession-stricken country has been patchy. Tax revenues continue to lag targets and the Greek economy has struggled to show signs of recovery after shrinking by about a quarter from its peak six years ago, mainly as a result of austerity policies imposed under two bailouts.

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