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16th Dec 2018

Greece will need third bailout, German minister says

A month before general elections in Germany, finance minister Wolfgang Schaeuble has broken the taboo of admitting that Greece will need a third bailout when the current one runs out, in 2014.

"There will have to be another programme in Greece," Schaeuble said on Tuesday (20 August) during a campaign rally in the northern-German town of Ahrensburg.

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  • Schaeuble: 'They are not out of the woods yet' (Photo: Constantine Gerontis)

As part of a third programme, he mentioned another lowering of the interest rates on the loans the eurozone has given to Greece.

"They are not out of the woods yet," he said.

So far, the German government has steered clear of admitting that the current bailout, worth €130 billion, will not suffice to get Greece out of the vicious spiral of deficit and debt.

Chancellor Angela Merkel, who is seeking re-election on 22 September, has meanwhile struck a more cautious tone.

"We always said that we will have to reassess the situation of Greece end 2014 or beginning of 2015. It is wise to stick to this calendar," she told Ruhr-Nachrichten on Tuesday.

Earlier this year, Germany's insistence not to deal with a funding gap of almost €10 billion for 2015-2016 delayed the negotiations on the second bailout for Greece, as the International Monetary Fund (IMF) was reluctant to sign off on a programme that does not get the country out of its financial mess once and for all.

The IMF was insisting at the time for EU governments to also take a cut on their loans to Greece, in order to lower the country's debt.

But Schaeuble on Tuesday again ruled out another debt restructuring for Greece, after private creditors agreed to lose more than half of their money on Greek bonds as part of the second bailout.

Speaking to foreign correspondents in Berlin on Monday, Green opposition leader Juergen Trittin said he expects another debt restructuring, adding that "Merkel always delays a decision until the very last moment, even if in the end it turns out to be more costly."

The German central bank is meanwhile also expecting a third bailout for Greece shortly after the German elections or "early 2014, at the latest," German weekly Spiegel reports, citing an internal Bundesbank document.

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Analysis

Why did Schaeuble break the Greek bailout taboo?

German finance minster Schaeuble put a cat among the pigeons by saying Greece will need a third bailout, a taboo before September elections. But insiders say it was no accident.

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