Thursday

6th Oct 2022

Greece could need third bailout, says euro commissioner

  • A third bailout could be worth up to €50bn, said Spain's economy minister (Photo: YoungJ523)

Greece could need a third bailout when its current programme expires at the end of June, the EU’s eurozone commissioner has said.

Speaking on Monday in Riga (2 March) Commission Vice President Valdis Dombrovskis said that a third bailout could be needed when the current programme expires in June even if eurozone ministers agree to give Greece a credit line, because Athens would be unlikely to fund itself on the capital markets.

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“Greece may need an additional arrangement after this programme expires,” said Dombrovskis, adding that “recent financial instability” made it less likely that Greece would be able to return to self-financing on the markets

“With the previous government, we were discussing how Greece would move back to the market financing with the help of a precautionary arrangement or enhanced-conditions credit line,” said Dombrovskis. “Now this scenario, however, seems less likely.”

There has been periodic speculation that Greece would need a further loan programme, on top of the €240 billion in loans it has received in two programmes since 2010, since German finance minister Wolfgang Schaueble raised the prospect in 2013.

For his part, Spanish Economy Minister Luis de Guindos on Monday said negotiations on a third bailout for Greece - worth between €30bn and €50bn - have already started.

The "central scenario for Greece is a deal on the basis of the current bailout, and new conditions to be set with flexibility," said de Guindos, who added that the country had no alternative to "European solidarity".

However, the spokesperson for Jeroen Dijsselbloem, the Dutch chairman of the Eurogroup of finance ministers, denied that new bailout talks are ongoing.

"Eurozone finance ministers are not discussing a third bailout," Simone Boitelle said.

Greece received a four-month extension to its bailout last week after tabling a programme of reforms that will keep to the strict economic and budget targets required by its creditors.

Finance Minister Yanis Varoufakis is expected to outline the plans, which include new taxes on the wealthiest Greeks, at a eurogroup meeting next week, with implementation to start immediately on a handful of key reforms.

But the country faces an acute cash-flow crisis. ECB statistics reveal that Greek bank deposits have collapsed from around €150 billion in early 2012 to little more than €45 billion.

Meanwhile, the €7.2 billion which remains in the bailout fund is on hold until Greece starts to implement reforms, as is €1.9 billion in profits made by the European Central Bank from buying Greek bonds, putting further pressure on the cash-strapped government.

There are fears that Greece could run out of cash within the next couple of weeks, as it faces a €1.5 billion repayment to the IMF, although these were played down by Varoufakis in an interview on Monday.

"We are confident that the repayments will be made in full, particularly to the IMF, and there will be liquidity to get us through the end of the four-month period," said Varoufakis, adding that "March is sorted."

The Syriza government insists that it does not want another austerity-tied bailout programme.

“Let them forget a third bailout. The Greek people put an end to bailouts with their vote,” said Prime Minister Alexis Tsipras at the weekend.

Greece needs 'new arrangement' on debt deal

Greece has indicated it will shortly ask for further assistance, in a sign the bailout extension agreed last week is just the beginning of a longer battle between Athens and its creditors.

Greece to seek war reparations from Germany

Greek PM Tsipras has reopened the painful question of German WW2 reparations, while his justice minister has threatened that German assets might be seized in compensation.

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