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Rutte Sees Possible Extra Steps to Keep Greece on Track

Dutch Prime Minister Mark Rutte
Dutch Prime Minister Mark Rutte. Photographer: Michele Tantussi/Bloomberg

Dutch Prime Minister Mark Rutte said Greece may need more financial help to stay in the euro, retreating from a hard line that included a willingness to consider the country’s exit from the currency bloc.

Echoing his German allies, Rutte declined to speculate on Greece leaving the 17-nation euro. “Wolfgang Schaeuble, the German finance minister, is entirely right that you have to take a view on the situation of Greece every couple of years again, whether we are on track and whether extra steps have to be taken,” Rutte said in an interview yesterday in The Hague.

Rutte said he opposed granting concessions to Ireland and Portugal that euro-area finance ministers this week agreed to give the government in Athens to keep it solvent. He declined to comment on a potential aid request by Spain and ruled out writing off European taxpayers’ loans to Greece.

“I absolutely believe that investors understand that Greece is a particularly difficult case,” said Rutte, who spoke in English. “I understand Ireland and Portugal are looking with keen interest at the Greek package and what that might mean for their countries.”

Portuguese Finance Minister Vitor Gaspar said Portugal and Ireland, which are receiving rescue loans, can benefit from the eased terms on the emergency aid for Greece.

Holding Fast

“I am of the opinion when you make your arrangements and come to a deal, so you made a deal with Portugal, you made a deal with Ireland,” said Rutte, who presides over one of the bloc’s four AAA rated governments. “I am from the Netherlands so that means we like to stick to the rules, and we like to stick to the deal and we like countries to do what they have promised.”

Greek bonds rose today, with 10-year yields falling 8 basis points to 16.32 percent at 10:20 a.m. in Athens.

Rutte, 45, elected in 2010, won re-election Sept. 12, avoiding the electoral fate of one-time counterparts such as Nicolas Sarkozy, Jose Luis Rodriguez Zapatero and Brian Cowen, amid the debt crisis. He has drawn criticism from the opposition for helping Greece while cutting pensions and health-care spending. Rutte said in the campaign he would not agree to more aid for Greece if it cost Dutch taxpayers more money.

On Sept. 4, Rutte said he would block a third package for Greece and disagreed with the proposition that everything needed to be done to keep the euro zone from breaking up. “Countries themselves need to do everything possible to remain in the euro zone,” Rutte said at the time.

Since then, German Chancellor Angela Merkel has visited Athens and European policy makers have praised Greek Prime Minister Antonis Samaras for meeting creditors’ demands.

Greek Aid

In the latest bid to keep the euro intact, euro finance ministers agreed Nov. 27 to cut the rates on bailout loans, suspend interest payments for a decade, give Greece more time to repay and also engineered a Greek bond buyback.

Schaeuble yesterday signaled to German lawmakers that Greece may need additional help through the European Union structural fund and further interest-payment reductions as long as it meets all its obligations under the agreement. The lower house in Berlin votes on the new deal tomorrow.

Even with those measures, Greece’s debt load, which will peak at almost twice the size of its economy in 2014, remains unsustainable, Moody’s Investors Service said today. The chance of a default is “high,” Moody’s analysts wrote.

Moody’s Call

“Given that around 70 percent of the total debt stock is held by official creditors, only a reduction in principal on outstanding official debt would lead to a semblance of sustainability in Greece’s debt,” the report said.

Euro nations are starting to tally the cost of this week’s tweaks to the rescue, partly from the European Central Bank’s steering of profit from its Greek bond holdings back to Greece.

Germany’s forgone profit from future ECB Greek holdings will total about 2.74 billion euros ($3.5 billion), according to Schaeuble. The plan may cost the Netherlands approximately 70 million euros a year during the next 14 years, according to Finance Minister Jeroen Dijsselbloem.

“We are losing some of our profit we would have been making,” Rutte said in the interview. “This was never intended. We did it to try to help Greece, it was a side effect.”

Rutte said the finance ministers’ agreement set the stage for a recovery. “I am a bit more optimistic than you are,” he said in the interview. “We now have a menu, an approach which brings the debt of Greece back into the realm of what we anticipated when the second package was installed in February. So, close to the 120 percent in 2020 and we now have even agreed to bring it under 110 percent in 2022.”

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