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Germany warns Greece: ‘no austerity plans approved, no release of funds’

Monday, June 27th 2011 - 05:44 UTC
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German finance minister Wolfgang Schaeuble German finance minister Wolfgang Schaeuble

German finance minister Wolfgang Schaeuble warned that a veto of the Greek government's austerity plans by parliament this week could mean Athens will not receive a bailout tranche it needs to remain solvent.

“If the package is rejected, which no one expects actually, then the prerequisites would no longer exist for the IMF, EU and Euro zone countries to release the next tranche of aid,” he told German Sunday newspaper Bild am Sonntag.

Athens needs to get its fifth slice of a 155.7 billion EU/IMF bailout worth 14.4 billion Euros, without which the country would be unable to cover pressing funding needs after July 15.

“The stability of the entire Euro zone would be in danger and we would need to quickly ensure that the risk of contagion for the financial system and other Euro area countries would be contained,” he said.

The Greek parliament is due to vote on Wednesday and Thursday on measures that include 6.5 billion Euros worth of extra austerity steps for this year and savings of 22 billion Euros for 2012-2015 to cut deficits and keep qualifying for EU/IMF aid. It also speeds up the sale of state assets under a 50 billion Euro privatization program.

“We are doing everything to prevent the crisis from escalating, but we must be ready for everything. That's our responsibility and we are preparing ourselves for that,” he said.

“I am confident that a majority can be found in the Greek parliament for the austerity package,” Schaeuble added.

The PASOK part of Greek Prime Minister George Papandreou counts 155 MPs in a 300-strong parliament, but his already razor thin majority may be undermined by two announced defections.

In Bild am Sonntag, Finance Minister Schaeuble also said that he expected private sector creditors to participate willingly in a second bailout package, which is likely to be similar in size to the 110 billion Euros of EU/IMF loans from May 2010 and should tide Greece over until the end of 2014.

“Stabilizing the situation in Greece and bringing it under control is really in the absolute interest of all investors. Therefore the private sector doesn't need any additional incentives,” Schaeuble said.

German banks, which say they have some 10-20 billion Euros in exposure to Greece, have called for the state to guarantee their risk with taxpayer money should they participate in some form of a debt rollover.

Separately, German Sunday weekly Welt am Sonntag reported that German banks were expected to name what kind of maturity extension on Sunday that they are willing to accept.

Categories: Economy, International.

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