Schaeuble Tightens Screws on Greece With Demand to Increase Cost Savings
German Finance Minister Wolfgang Schaeuble said that Greece will have to carry out extra savings before more international aid is freed up, tightening the screws on the Greek government as it faces down budget-cut protests.
Greece might receive additional help if a quarterly assessment next month by European officials and the International Monetary Fund shows that the government’s savings program is falling short of targets agreed on last year, Schaeuble said in a speech to the lower house in Berlin today.
“If it turns out that Greece can’t return to the financial markets on the timeline laid out last year, then we have to talk about what additional measures Greece, first and foremost, can take,” Schaeuble told lawmakers. “We won’t be able to agree to additional measures without clear conditions.”
Chancellor Angela Merkel’s government, the largest contributor to victims of the sovereign debt crisis, is tamping down Greek expectations of a further bailout without strict terms in return. Greece ground to a halt yesterday as workers joined a general strike to protest existing deficit cuts and state asset sales.
The German parliament’s Budget Committee approved aid for Portugal from the European rescue fund at a late-night meeting in Berlin yesterday. Only the anti-capitalist Left Party voted against. The committee called on Merkel not to allow a second tranche of aid until a new Portuguese parliament is elected.
‘Necessity for Solidarity’
It’s right for Germany and other AAA-rated nations in Europe including Finland and the Netherlands to impose conditions on aid for Greece, said Otto Fricke, budget spokesman for Merkel’s Free Democratic Party coalition partner.
“If there is a necessity for solidarity by Germany, it means on the other side there has to be solidity,” Fricke said in an interview with Bloomberg Television from Berlin.
Greek government bonds fell, pushing the two-year note yield to a record, as speculation that the country will have to restructure its debt intensified. The yield on the Greek two- year note climbed 11 basis points to 25.40 percent as of 9 a.m. in London, after earlier rising to 26.77 percent, the most since before the introduction of the euro in 1999.
In a replay of last year, when Merkel dug in her heels against aiding Greece for months before backing a 110 billion- euro ($156 billion) bailout, she is again refusing to commit to more help even as European officials warn of the impact of the alternative, a restructuring of Greek debt.
‘No Other Solution’
For Greece, European leaders “have to increase the package for the next two years in order to cope with these challenges,” Deutsche Bank AG Chief Executive Officer Josef Ackermann said in an interview today in St. Gallen, Switzerland.
“There is no other solution,” Ackermann said. A Greek restructuring would be a “huge mistake,” he said. “The losses in many areas would be too high and could provoke a contagion impact.”
European banks have $130 billion in exposure to Greece, according to Credit Suisse Group AG strategist Andrew Garthwaite. Deutsche Bank, Germany’s biggest lender, had net sovereign exposure to Greece of 1.6 billion euros at the end of last year, it said in March.
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