Greece will need third aid deal - Schäuble

New bailout would focus on plugging an expected funding shortfall over 2014-2016

Germany’s minister for finance Wolfgang Schäuble has admitted that Greece would need a third aid package.

Germany’s minister for finance Wolfgang Schäuble has admitted that Greece would need a third aid package.

Tue, Aug 20, 2013, 15:26

Germany’s minister for finance has admitted for the first time that Greece would need a third aid package.

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

In Athens, a Greek finance ministry official told Reuters 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 on condition of anonymity.

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

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

Schäuble’s comments go beyond any utterances from Chancellor Angela Merkel, tipped to win a third term in the September 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.

Schäuble 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 on Tuesday.

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

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

The international lenders, known as the troika, will return in 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, the ECB’s 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 told Reuters.

Progress on reform in the recession-stricken country has been patchy and there have been several reports that Greece may need another aid package or 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 which are unpopular with taxpayers.

Reuters