German Finance Minister Wolfgang Schaeuble said remarks that Greece would need another debt cut prompted him to say this week that the cash-strapped country will receive another aid program.
“The debate that there will be a new debt cut was dangerous” as it could have fanned the euro region’s debt crisis after promises that the the first cut was unique, Schaeuble told visitors to his ministry’s open day in Berlin.
“You could have a problem somewhere in Malta, and interest rates would rise in Spain, and the economy goes down. That’s something I wanted to avoid at all cost,” Schaeuble said.
At the same time, answers had to be given to questions on whether Greece would need any fresh money, Schaeuble said. Even dyed-in-the-wool members of his Christian Democratic Union party had expressed concerns at party rallies that the government was trying to hide aid requirements until after the German election on Sept. 22, he said.
“I had to make clear that there won’t be a debt cut, but that that doesn’t mean that nothing has to be done next year,” Schaeuble said. “I wanted to avoid that anybody could say that this government isn’t saying what it knows before the election.”
Greek Finance Minister Yannis Stournaras told Athens-based newspaper Proto Thema the country may need 10 billion euros ($13.4 billion) in aid. While another debt cut isn’t under discussion, Greece will get more time to repay loans and lower interest rates if it achieves a primary surplus, he said.
While declining to mention any figures, Schaeuble today said the volume of the next aid program will be “much lower” than previous ones and not all of Greece’s additional requirements can come from the European Union’s so-called structural funds.
Separately, Schaeuble said leaders and finance chiefs from the Group of 20 will discuss in St. Petersburg next month how monetary stimulus can be withdrawn and a return to positive yields in some countries achieved without throwing economies into disarray
“One has to weigh this very carefully,” Schaeuble said. “How can we steer this thing so that the economy doesn’t fall apart but the money markets still stabilize again, normalize again, so you get one percent more interest on your savings account than the rate of inflation.”
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