On his first visit to Greece since it spawned the financial crisis in 2009, Mr. Schaeuble said there are no “shortcuts” to austerity measures even as he lauded the Greeks for their “determination”. At a forum Thursday with German and Greek business people, the German minister was asked about measures including debt relief for the country.
“If Greece has delivered” on reforms “and is running a primary surplus, then we will decide, and if needed, additional measures,” said Mr. Schaeuble, who spoke in English. “We need to protect what we have achieved,” the minister added.
Greece has stumbled in fulfilling austerity targets set by international lenders, falling short on tax-revenue collection and state-owned asset sales as uncertainty over the country’s debt sustainability has grown. Greece’s public debt is expected to peak at 175.6 per cent of gross domestic product this year and drop below 120 per cent of GDP by 2021, creditors say.
Mr. Schaeuble’s comments suggested building on previous relief measures. European finance ministers agreed last November to cut the rates on bailout loans and suspend interest payments for a decade, while giving Greece more time to repay and engineering a Greek bond buyback. He was unyielding on a writedown.
Mr. Schaeuble said that a writedown on Greek debt held by European bailout funds would “destroy any confidence” and warned against stoking expectations over debt relief.
“Nobody who knows anything about the issue at hand is talking seriously about a further cut for private investors,” he said. “Rather, it’s about the fact that it’s possible that Greece after the end of the current programme next year will need another programme.”
Any debt writedown would follow last year’s agreement by private investors to take a 53.5 per cent loss on the face value of their Greek bond holdings, the biggest writedown ever. That cut the nation’s debt by about 100 billion euros.
Mr. Schaeuble arrived in the Greek capital hours after the recession-wracked country’s lawmakers approved a new round of public job cuts. The German minister promised 100 million euros of loans for Greek companies.
“Greece has taken big steps for reforms in its economic structures,” Mr. Schaeuble said. “These reforms are showing the first signs” of success. Still, much work is left, he said.
With Chancellor Angela Merkel seeking a third term in 22 September elections, further concessions from Mr. Schaeuble to Greece aren’t on the agenda.
The Greek Parliament in a midnight vote passed a bill that puts 25,000 public employees on notice for possible dismissal, a step demanded by creditors to release the country’s next installment of loans from a 240-billion bailout package.
“An unprecedented effort is now under way to reconstitute our country’s economy and state,” Finance Minister Yannis Stournaras told lawmakers during the debate. “I’m totally confident that the road we’re following is the right one. The effort is yielding results.”
With his coalition reduced and Greece stuck in its sixth year of recession, Prime Minister Antonis Samaras pushed the job cuts over protests amid record unemployment of 27 per cent.
In an attempt to boost an economy that has shrunk by more than a quarter since 2008, Schaeuble’s support will come in the form of loans to small and medium-sized Greek businesses through state-owned lender KfW Group, a German government official told reporters Wednesday.
Mr. Samaras’ government has said its aim is for creditors to forgive some of the 318 billion euros Greece owes mostly to euro-region taxpayers and the International Monetary Fund.
“The 100 million package is a box of chocolate which is nice, but it does not really help Greece to cope with its debt,” said Peter Bofinger, a member of Mrs. Merkel’s council of economic experts. “A second debt restructuring is inevitable, but definitely it will not take place before the German elections in September.”
© 2013, Bloomberg News