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Schaeuble Signals Greece May Need More as Bild Slams Deal

November 28, 2012

German Finance Minister Wolfgang Schaeuble

German Finance Minister Wolfgang Schaeuble wrote in a letter to German lawmakers obtained by Bloomberg News that euro-area governments may provide additional funding through the European Union structural fund and further interest-payment reduction as long as Greece meets all its obligations under the agreement. Photographer: Tomohiro Ohsumi/Bloomberg

German Finance Minister Wolfgang Schaeuble signaled that Greece may need additional help as the country’s most-read newspaper slammed a rescue accord as a “never-ending story” financed by German taxpayers.

Euro-area governments may provide additional funding through the European Union structural fund and further interest- payment reduction as long as Greece meets all its obligations under the agreement, Schaeuble wrote in a letter to German lawmakers obtained by Bloomberg News. Legislators in the lower house, or Bundestag, will vote on the measure on Nov. 30.

They may confront increased public resistance as Bild- Zeitung, a tabloid that’s called in the past for Greece’s exit from the currency union, pilloried yesterday’s agreement in Brussels to ease terms on emergency aid for Greece.

“The Greek patient is beyond help,” Bild said in a commentary, adding that the ever-rising costs were falling on German taxpayers. “One hardly needs to imagine the worst scenario: the patient dies, the paramedic goes bust.”

German lawmakers are set to approve the new terms of aid for Greece, where the European debt crisis originated over three years ago. Euro-area finance ministers also agreed to scale back debt by engineering a Greek bond buyback.

Cut Debt

The yet-to-be-approved additional measures are to slice off 2.7 percentage points of Greece’s debt as measured against gross domestic product by 2020, according to a table provided in Schaeuble’s letter. That will go toward scaling back the country’s debt load to 124 percent of GDP in eight years from the 144 percent projected if policy makers don’t act.

That’s a smaller portion than the buyback, which accounts for 11 percentage points -- more than half -- of the drop, the letter shows. Having failed to agree on debt relief, a move that would have fallen on contributing nations’ taxpayers, euro ministers will rely on the more complicated and risky buyback.

“We’re relatively confident that it can work,” Schaeuble told reporters yesterday in Berlin. If the buyback fails, “the troika will have to take other measures and tackle the issue in another way,” he said.

Meanwhile, Chancellor Angela Merkel said she was “very optimistic” that European leaders will resolve the crisis, if it stumbles amid setbacks and progress is slow.

‘Upward Trajectory’

“I think we have good chances to get beyond the phase where you wake up every morning and ask how is this going to go on,” Merkel told a regional-development conference in Regensburg. “Now I think we’re more on the upward trajectory.”

She spoke as euro nations began to tally the cost of the rescue, partly from the European Central Bank’s steering of profit from its Greek bond holdings back to Greece.

Germany’s forgone profit from future ECB Greek holdings will total about 2.74 billion euros ($3.5 billion), according to Schaeuble. Spain will have an impact of 1.7 billion euros through 2020, the newspaper ABC reported, citing Economy Ministry officials. The newspaper L’Echo reported that forgone profit and reduced interest rates will cost Belgium 90 million euros next year.

The plan may cost the Netherlands approximately 70 million euros each year during the next 14 years, Finance Minister Jeroen Dijsselbloem said yesterday.

Reduced Fear

National central banks could deliver a 3.7 billion-euro reduction in Greece’s financing needs through 2014 by rolling over the Greek bonds in their investment portfolios, Schaeuble’s letter said. Such a decision would rest with central bankers.

Greek Finance Minister Yannis Stournaras told reporters in Athens today that the debt buyback is a significant part of the accord and the reduced fear of his country exiting the euro is leading to a return of deposits to Greece. Stournaras said a Greek debt buyback announcement will be made next week and that it will be voluntary and open to everyone.

Lawmakers from Merkel’s coalition and two of three opposition parties voiced approval of the deal as the Bundestag prepared to vote by the end of the week, helping Greece past one of Europe’s biggest political hurdles.

“We’ve always gotten a majority in the past and I don’t think that will change,” Christian Democratic Union parliamentarian Michael Grosse-Broemer, who’s responsible for gathering his party’s votes, told reporters in Berlin yesterday. “It’s good that there was an agreement.”

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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