German Finance Minister Wolfgang Schaeuble ruled out another aid program for Greece even though the country is in a “very difficult situation” with a shrinking economy.
“It can’t be helped -- we can’t make yet another new program,” Schaeuble told visitors today at his ministry’s open day in Berlin. “There are limits.”
Gross domestic product has declined by more than 20 percent in four to five years in Greece, which also has high unemployment, he said. Two bailouts totaling 240 billion euros ($296 billion) have been implemented for the nation since the European debt crisis began, and the country is now contending with austerity measures needed to qualify for more aid.
Greece faces a financing gap of 14 billion euros in each of the next two years, a delegation from the so-called troika of the European Commission, European Central Bank and International Monetary Fund has found, according to Spiegel magazine today. That compares with a previous estimate of 11.5 billion euros a year, Spiegel said, without saying where it got the information.
The sovereign-debt crisis mustn’t become a “bottomless pit” for Germany, even though Europe’s biggest economy would pay the highest price in a breakup of the euro region, Schaeuble said. Greek Prime Minister Antonis Samaras wants the country’s fiscal adjustment program to be extended by two years to the end of 2016.
Greece’s economy would contract at a slower pace in 2013 and expand in 2014 if two extra years were granted, Athens-based newspaper Imerisia reported today, citing unidentified finance ministry officials.
Samaras will meet German Chancellor Angela Merkel on Aug. 24 in Berlin and French President Francois Hollande on Aug. 25 in Paris to lobby for an easing of bailout terms.
European leaders have struggled to contain the debt crisis that’s roiling the 17-nation region. European Central Bank President Mario Draghi said Aug. 2 the bank would buy sovereign bonds to bring down yields if countries applied for support from Europe’s rescue fund and accepted conditions.
Market reaction to the debt crisis isn’t justified by the “objective figures,” and public finances in the U.S. are in worse shape than the euro region’s, Schaeuble said today. It would still be “stupid” not to make contingency plans in case rescue efforts don’t work out as planned, he said.
European Stocks Climb
Spanish 10-year bond prices rose for the first week this month in the most recent week and German 10-year bund prices fell on the view the European Central Bank and European Union will take steps to bail out the Iberian nation. Expectations of European economic stimulus drove the region’s stocks this past week to the highest level in 13 months.
While the prospect of the euro failing is “nonsensical speculation” and would be very expensive for Germany, the region’s debt crisis won’t be solved in just a few months, and “it will take time” for confidence to return to financial markets, Schaeuble said.
“Many are telling us now to turn a blind eye to debt reduction” to save the euro, Schaeuble said, rejecting the option to let the ECB finance government debt. “That would only postpone the problem to tomorrow.”