German Finance Minister Wolfgang Schaeuble said Europe is better prepared for a Greek default than two years ago, jacking up pressure on Greece to hold to its pledges and find the savings needed to win a second bailout.
Euro-area governments will decide “soon” on the new aid program, European Union Economic and Monetary Commissioner Olli Rehn said. Finance ministers are due to convene in Brussels tomorrow for their second extraordinary meeting in a week after telling Greek officials to identify additional cuts of 325 million euros ($428 million). The measures are among conditions that must be met by tomorrow for Greece to secure a 130 billion-euro rescue needed to avert financial collapse.
“We want to do everything to help Greece master this crisis,” Schaeuble said in an interview with ZDF television late yesterday. “What we’re experiencing at the moment is much less bad than what may happen to Greece if the attempts to keep Greece in the euro zone failed.” Yet if everything fails, “we’re better prepared than two years ago,” he said.
Germany, the largest contributor to euro-area bailouts, is losing patience with Greece as Europe’s most indebted country threatens to drag the region’s economy into recession more than two years after the sovereign-debt crisis first emerged.
Greek Prime Minister Lucas Papademos planned to hold a Cabinet meeting at 4 p.m. Athens time -- an hour later than originally scheduled -- to discuss actions required to qualify for the bailout. The Greek government will cut spending at ministries to find the 325 million euros, the state-run Athens News Agency said, citing spokesman Pantelis Kapsis.
‘Hedging Its Bets’
While Schaeuble’s comments toward Greece display a “strong element of brinkmanship,” the tone is “starkly different” from just a few months ago, Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mailed comment.
“Germany appears to be hedging its bets: giving Greece a slim chance to stay in the euro zone while preparing the ground for its possible exit,” he said.
Greece’s economy, already reeling from austerity measures demanded by creditors, shrank 6.8 percent in 2011 compared with a 6 percent contraction forecast by the government, statistics published today showed.
Underscoring the contrast with Greece, now in what is predicted to be a fifth year of recession, German investor confidence surged to a 10-month high in February on the back of improved global growth and signs the debt crisis is abating, the ZEW Center for European Economic Research in Mannheim said.
Italy, Spain Auctions
The euro advanced and Italian and Spanish borrowing costs plunged to the lowest in at least 11 months at debt sales today as investors ignored downgrades by Moody’s Investors Service and shrugged off Greece’s woes. Italy sold 6 billion euros of bonds, meeting its target as its three-year borrowing costs fell to 3.41 percent, the lowest since March. Spain sold 12-month bills at an average rate of 1.899 percent, the least since October 2010.
“I expect that we should soon be able to decide on a new second program for Greece, also in order to launch an offer on private-sector involvement which is a very important part of this overall package,” the EU’s Rehn told reporters today in Strasbourg, France. Political leaders are committed “to make this work and avoid a disorderly default of Greece, which would have devastating consequences,” he said.
European leaders separately received intimations of possible help from China as Premier Wen Jiabao said his government is willing to step up its involvement in resolving the debt crisis so long as Europe sends a clearer message to show how it’s working to strengthen its finances.
“China’s willingness to support Europe to cope with sovereign-debt problems is sincere and firm,” Wen said today at a joint press conference in Beijing with European Union President Herman Van Rompuy. “China is ready to get more deeply involved in participating in solving the European debt issue.”
While political leaders in Berlin and Brussels welcomed the passage of austerity measures in the Greek parliament on Feb. 12 as an important step in freeing up more aid, they said extra steps still need to be agreed upon and pledges fulfilled. Chancellor Angela Merkel signaled that no more money beyond the 130 billion euros will be made available, telling reporters that “there can’t and won’t be any changes to the program.”
Greek leaders have been told they must provide written assurances of their support for measures and policies in return for new financing, the government in Athens said.
‘Quid Pro Quo’
“We can and want to help only if there is a quid pro quo on the Greek side,” German Economy Minister Philipp Roesler said on Feb. 12 in an interview with ARD television. If not, the “day X” of a Greek default “has lost much of its horror.”
Greek products are too expensive, with a minimum wage that exceeds the euro-region average, Schaeuble said. The country “has long lived beyond its means and must urgently develop a competitive economy,” he said.
Greece is being subject to an “overdose of austerity” with the result that “we will likely see more many more tense moments in Greece, with a very serious risk that Greece will eventually have to leave the euro,” Holger Schmieding and Christian Schulz of Berenberg Bank in London said in a note.
German and other policymakers have made clear that “support for Greece could be cut off at any time if the country fails to implement the harsh program,” the economists said.