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Cat is out of the bag on Greek bailout

Wednesday, August 21 16:02:20

The ECB joined Germany today in playing down talk of a third bailout package for Greece, but reaffirmed the euro zone would help the country trim debt as long as it stuck to its latest aid programme.

Speaking in Athens a day after German Finance Minister Wolfgang Schaeuble bluntly predicted Greece would need a new bailout, ECB executive board member Joerg Asmussen said he had not discussed the issue at talks with senior Greek officials.

He referred instead to the euro zone's pledge last year to support Greece until it can tap markets again, provided it sticks to its current bailout obligations and posts a budget surplus before interest payments.

"This is a decision taken in November last year, it is public knowledge, and there's nothing new and there's nothing to add," he said. "If we look at how things unfold, we will know not before spring next year if the country has reached a primary surplus on an annual basis."

In Berlin, German officials sought to distance themselves from Schaeuble's comments, which broke a pre-election taboo by describing a new rescue as inevitable.

Greece has already been bailed out twice since 2010 with 240 billion euros worth of agreements coordinated by the ECB, European Union and International Monetary Fund.

It had been expected to seek some form of additional debt relief sooner or later to bring its massive debt down to a manageable level, but the openness of Schaeuble's statement that there would need to be a third bailout for Athens came as a surprise.

Germany's finance ministry said the euro zone would take a fresh look at Greece's aid programme in mid-2014 and that Berlin was not aware of any discussions on how to structure a new rescue package.

"We have reached the middle of the current programme. It is August 2013, we will certainly have to look in mid-2014 at where we are, what the conditions are and whether the programme has been fulfilled," said spokesman Martin Kotthaus.

Schaeuble's boss, Chancellor Angela Merkel, in her first comments on Greece since his comments, stuck to her line that it was too early to discuss another package, or to speculate how large it could be.

"I can't say today what kind of sums might be necessary," she told broadcaster Sat.1. "Only in the middle of next year will we be able to say."

A Greek finance ministry official speaking to Reuters on condition of anonymity said any further help for Greece would aim to cover its funding shortfall in 2014-2016 and would be much smaller than the previous aid packages, given the country's limited funding needs for the period.

The International Monetary Fund has put Greece's uncovered funding needs for 2014-2015 at 10.9 billion euros.

At least part of that stems from national European central banks refusing to roll over some Greek bonds they hold, as well as a potential shortfalls in tax and privatisation revenues and Greece being unlikely to fully return to bond markets next year.

Such estimates are revised frequently and are highly sensitive to budget and economic growth projections, which Greece's lenders are expected to update in the fall. (Reuters)