Third bail-out for Greece?

Estimates suggest another €11bn needed

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Greece’s financing needs over the short and medium term have emerged as a major campaign issue in Germany ahead of a general election later this month. Peer Steinbrück, the Social Democratic challenger in the 22 September vote, has attacked Chancellor Angela Merkel for imposing “a deadly dose” of austerity on Greece and other troubled eurozone economies. Steinbrück made his comments on Sunday (1 September) during the campaign’s first and only live television debate.

Steinbrück, who has been lagging in opinion polls, accused Merkel’s centre-right coalition of pushing Greece into a “vicious circle” of debt and depression, arguing that eurozone economies in trouble needed “a second Marshall Plan,” a reference to American aid that helped European economies recover after the Second World War.

The figures

In the near term, Greece needs some €4 billion this year and next because revenue from tax rises and privatisations has been lower than in budget forecasts. In the medium term, through 2016, the country’s creditors in the ‘troika’ – the International Monetary Fund, the European Central Bank and the European Commission – will have to deal with a shortfall that threatens the IMF’s participation in the current bail-out. In July, the IMF estimated that Greece will need another €11bn as of autumn next year – in effect, a third bail-out, to help the country repay the first two. A technical team from the troika is due in Athens on 16 September to assess the creditors’ options.

The government of Prime Minister Antonis Samaras – a ‘grand coalition’ of Samaras’ centre-right New Democracy and the Socialists of Evangelos Venizelos, the deputy prime minister –is desperate to avoid having to impose yet another round of austerity measures on an already beleaguered society.

The government’s majority in the 300-seat parliament has been reduced to just five by the defection earlier this summer of a third, junior coalition partner, over the abrupt closure of Greece’s state broadcaster, and there is a sense that the government could collapse should another round of austerity measures become unavoidable.

Yannis Stournaras, Greece’s finance minister, had suggested that some €50 billion in bank aid already disbursed could be transferred to the European Stability Mechanism, the eurozone’s permanent bail-out fund, and so would not count toward the country’s budget deficit. But the idea was given a a cool reception by Wolfgang Schäuble, Germany’s finance minister, and Jeroen Dijsselbloem, his Dutch counterpart, who chairs meetings of eurozone finance ministers.

Schäuble had caused irritation within Merkel’s Christian Democratic Union in August when he articulated what had been an open secret in Berlin, that Greece will need another bail-out next year.