27th Sep 2020

Austria: Third Greek bail-out on the cards

  • Greece may need another bail-out in 2015 (Photo: Wayne Lam (Ramius))

The Austrian Chancellor has said Greece might need a third bail-out in the coming years, even as it struggles to clinch approval for its second aid package.

"I would not trust anyone who says that [the current level of help] for Greece is enough ... For Greece it depends on whether they can stick to these [austerity] measures over several elections," Werner Faymann said in an interview with Austrian paper Oesterreich out on Sunday (4 March).

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  • Belgian trade unions last week showed solidarity with Greece in front of the German embassy (Photo: Valentina Pop)

According to a draft report by the troika of international lenders (the European Commission, the European Central Bank and the International Monetary Fund) - seen by German magazine Der Spiegel - Greece might need another €50 billion in 2015, as it will not be able to return to open markets to borrow money.

The German government asked for this paragraph to be deleted - Der Spiegel says - because it did not want to divert attention from the second, €130 billion bail-out, currently under discussion.

For its part, the Greek parliament has just passed a series of troika-demanded austerity measures, including cuts to medical subsidies and the minimum wage.

General elections scheduled for April are expected to see a surge in popularity by anti-bail-out fringe parties on the left and right.

Greece is currently in the middle of a bond swap operation aimed at slashing €100 billion off its debt - a measure required for the intricate €130 billion package to come together. The final approval of the second bail-out is due next week after the bond swap results are made public on Friday.

Meanwhile, ratings agencies are putting Athens in default territory, with Moody's on Friday downgrading the country to its lowest rank, C.

The agency said its decision "was prompted by the recently announced debt exchange proposals for Greece, which imply expected losses to investors in excess of 70 percent."

It added that the debt-restructuring deal is needed to stabilise Greece, but warned: "The risk of a default even after the debt exchange has been completed remains high."

It also shared the troika's redacted idea that Athens may need another bail-out. "The country is unlikely to be able to access the private market once the second assistance package runs out; and its planned fiscal and economic reforms will still face very significant implementation risks," it noted.

Standard & Poor's a few days earlier also slashed Greece's rating to "selective default" - a move which forbids the European Central Bank from accepting Greek-issued bonds as collateral for bank loans.

Third Greek bail-out not ruled out

Eurozone chief Jean-Claude Juncker and German finance minister Wolfgang Schauble have said they do not rule out the need for a third Greek bail-out.

EU countries stuck on rule of law-budget link

Divisions among EU governments remain between those who want to suspend EU funds if rule of law is not respected, and those who want to narrow down conditionality.

MEPs warn of 'significant gaps' in budget talks

The budget committee chair said the European Parliament expects tangible improvements to the package in its talks with member states - while the German minister argued that the EU leaders' deal was difficult enough.

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

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