European Central Bank Executive Board member Joerg Asmussen said Greece may need more aid, joining the International Monetary Fund in expressing doubt that the two existing bailouts will suffice.
Even if Greece meets its budget goals, “there could be additional need for external financing because, for example, growth is worse than was initially anticipated,” Asmussen said at an event in Berlin yesterday. Such financial aid can only come “from the member states of the euro zone,” he said, ruling out ECB involvement because that would be “prohibited monetary state financing.”
The comments mean two thirds of the so-called troika that’s inspecting Greece’s financial position have now publicly spoken about the possible need for an additional bailout. IMF Managing Director Christine Lagarde said on Sept. 24 Greece faces a financing gap that won’t be solved by budget measures because a weak economy and delayed privatizations have worsened its fiscal situation.
“This is the first time that an ECB official is talking about more aid for Greece in such an explicit way,” said Jacques Cailloux, chief European economist at Nomura International Plc in London. “It can be interpreted either as a possible aid package or another” debt writedown, he said.
International lenders have so far pledged funds totaling 240 billion euros ($309 billion) to Greece, which also had 100 billion euros written off its debt by private-sector investors this year in the biggest restructuring in history.
Inspectors from the troika, which comprises the European Commission, the IMF and the ECB, will return to Athens on Sept. 30 to continue to assess whether Greece is meeting the terms of its bailout and can receive the next installment.
In a March report on Greece, IMF economists said the country may need more aid from Europe or further debt restructuring if the current loan program went off track.
Lagarde has said the IMF will not lend Greece any more money and the ECB has rejected participating in a debt restructuring. German Finance Minister Wolfgang Schaeuble has also ruled out further aid, saying the last bailout stretched international creditors to their limits.
Greek Prime Minister Antonis Samaras has struggled to broker an agreement with the troika and his coalition partners on a package that will include more than 7 billion euros of cuts to wages, pensions and benefits in a country battling a fifth year of recession and with nearly a quarter of the workforce unemployed.
The two-year budget-cut package, worth 13.5 billion euros overall, is key to Greece receiving the next tranche of the existing bailout. Greece’s budget deficit is due to shrink to about 7 percent of GDP this year from 9.1 percent in 2011.
“There is a budgetary gap in Greece which needs to be closed,” Asmussen said. “The Greek government has to deliver.”
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