German Finance Minister Wolfgang Schaeuble’s public statements that Greece may need a third rescue package started a debate on the necessity and effects of additional aid to the country.
The IMF estimated Greece needs between 8.25 and 10.5 billion euros next year as the recession reaches six years. It has already received 240 billion euros in bailout funds while implementing stringent austerity measures.
Schaeuble also said there is no chance for debt relief or for Greece to impose the losses on the EU-IMF-ECB Troika as in 2001 when the Troika arranged for private investors and banks to take 74 percent cuts in holdings to save the Greek economy.
Faced with criticism during an election year, Germany Chancellor Angela Merkel also cautioned that allowing Greece a “haircut” this time will mean taxpayers in the other 16 Eurozone countries will pick up the difference.
“But this is not a bailout. We can even find this amount of money in the markets if necessary, even if it could be more expensive,” Aggelos Tsakanikas, head of research for the Athens-based Foundation for Economic and Industrial Research (IOBE,) told Southeast European Times.
Tsakanikas said conditioning additional aid with more pay cuts, tax hikes and slashing pensions – as Germany has signaled in the meantime – will be unacceptable to Greece Prime Minister Antonis Samaras, who pledged earlier there will be no more austerity measures. “If such an amount of money is linked with additional fiscal measures, we will be very hesitant to enter such a program,” Tsakanikas said.
Tsakanikas also said Greece has registered a 2.9-billion-euro primary surplus, excluding interest, municipal and state enterprise costs. “The interest rates and the profile of the debt could be restructured and that is it.” Bloggers are divided on the need, impact and conditions attached to the third bailout.
Blogger Dimitris Kazakis said there is no doubt a third bailout will help the country but may not be enough. “This too, will not be enough and halfway or at the end of a two-year period, the same scenery will be repeated with the discovery of a new fiscal void,” Kazakis said.
Others are concerned about the conditions that will come with the bailout. Blogger kourelia said while the earlier bailouts may have helped with critically-needed cash, the overarching costs to society now may be too much to bear.
“The support plan for Greece organised by the IMF and continues to be carried out by the prime minister is going from good to better. The first two bailouts were so successful that the Germans are thinking of giving us a third one, too,” kourelia said.
Gikas Hardouvelis, blogger and economics professor at the University of Piraeus, proposed that the EU lend Greece another 10 billion euros to allow for a smoother fiscal consolidation and cover the country’s needs up to 2016.
Such an approach will avoid an immediate negative fiscal shock and allowing the economy to stabilise, Hardouvelis said. “That way, they can buy more supervisory time as well, say, another 4-5 years, and thus ensure that on-going reforms are consolidated and would not be removed in the future by the various interest groups.”
Some, however, argued Greece may cope with the existing funds and may not need a third bailout. “Greece has not exactly been slacking off. It has been doing its best to meet the requirements laid out by the Troika and has made great progress in curbing spending,” Piponomics said.
(Used by permission of Southeast European Times, www.setimes.com)