Germany Issues Warning To Greece
Greece and the IIF said Saturday they were on the verge of a deal to write off €100 billion worth of the debt, pending the outcome of separate talks on a new, multi-billion euro bailout for Athens.
In separate statements, Greece and the creditors both stated that progress in the talks and a final deal would be announced next week with the new loan program.
Now the focus moves to the EU summit in Brussels today where the continent's leaders will approve- or not - the terms of the debt restructuring and the new loan. But complicating those discussions are concerns that Greece's funding needs might be bigger than originally thought, while Europe appears divided over how to cover the gap.
Media reports suggested that Germany was pushing for Greece to give up control over its budget. The special commissioner appointed by the EU would have veto over the Greek government's budget decisions to ensure the country met its austerity measures
Evangelos Venizelos, finance minister, said Sunday that such a measure was unnecessary.
Anyone who puts a nation before the dilemma of 'economic assistance or national dignity' ignores some key historical lessons, he said in a prepared statement. Greeks will fulfill their historical obligation to take Greece out of the deep fiscal, social and developmental crisis, and will take and implement tough, yet necessary, decisions.
During the fall of 2011, European leaders and the IMF agreed to provide Greece with €130 billion in financing to cover the country's needs through 2015. But the new loan was contingent on a debt write-down plan that would slash Greece's debt ratio to 120%.
Since then,continued deterioration in the Greek economy has widened to nearly 10% of GDP could put those projections in doubt. Euro-zone and IMF officials now say Greece may need roughly an extra €15 billion.
Annoyed by the slow pace of budget overhauls in Greece, Germany is leading a push to force Athens to turnover some control over its budget decisions to Europe.
Germany's finance minister issued an direct warning that the euro zone might refuse to grant Greece a fresh bailout, pushing Athens into default unless it persuades Europe it can overhaul its economy and institute measures demanded by the EU.
Greece needs to decide, Wolfgang Schäuble said in an interview with The Wall Street Journal, when asked whether the euro zone would grant or withhold the second bailout package for the country since 2010, expected to be in excess of €130 billion ($172 billion).
Europe is prepared to support Greece with the new loan package, Mr. Schäuble said, but he warned: Unless Greece implements the necessary decisions and doesn't just announce them...there's no amount of money that can solve the problem.
Germany is in a very aggressive mood these days, knowing that they will have to deal with Portugal, Italy and Spain shortly and the outcome of these agreements will set the table for those talks.