(Adds Steinbrueck comment in 11th paragraph.)
Aug. 29 (Bloomberg) -- German Finance Minister Wolfgang Schaeuble closed down one avenue of help sought by Greece while signaling that the Greek government can expect additional aid of as much as 11 billion euros ($14.7 billion).
Schaeuble said in an Aug. 27 interview in Berlin that a figure of 10 billion euros to 11 billion euros “appears plausible.” At the same time, he rejected retroactive direct recapitalization of banks from Europe’s permanent rescue fund as proposed by Greek Finance Minister Yannis Stournaras.
“We must be very careful not to promise too much in this area,” Schaeuble said. “Raising expectations that can’t be realized is always dangerous.”
Schaeuble thrust Greece on to Germany’s election campaign when he said on Aug. 20 that the country at the heart of the debt crisis will need another aid program after the current one expires next year. Stournaras told Handelsblatt newspaper this week that Greece faces a financing gap of about 10 billion euros in 2014 and 2015. He proposed shifting debt from the country’s public coffers to the European Stability Mechanism to complement reductions in loan rates and maturity extensions.
The fund’s ceiling for direct bank recapitalizations is 60 billion euros, and “those who know the figures are aware that the entire capacity of the ESM would be used up very quickly if it was used for the retroactive recapitalization of banks in the program countries,” said Schaeuble. “One can read time and again that some in the euro zone want to use the instrument of direct bank recapitalization through the ESM retroactively. We don’t even have the instrument yet.”
Schaeuble said that “several more steps are needed” before direct bank recapitalization is available. Among them, national parliaments including Germany’s lower house, the Bundestag, have to back “the new ESM instrument.”
Greece is in the sixth year of a recession deepened by spending cuts and tax increases linked to a 240 billion-euro bailout from the euro area and the International Monetary Fund.
European Union Economic and Monetary Affairs Commissioner Olli Rehn said on Aug. 21 that the “possible continuation of Greece’s bailout program and its financing” will be assessed after a review next month, following Germany’s Sept. 22 vote, by the so-called troika of the IMF, the European Commission and the European Central Bank. He said in an interview in Brussels yesterday that “it is premature to quote any figure.”
“The troika mentions a figure of 10-11 billion euros by 2016, which appears plausible,” said Schaeuble. “On the one hand that’s a large sum, on the other hand it is of a moderate size compared to the two European bailout programs for Greece” to date.
Schaeuble has ruled out a second debt cut for Greece, saying that would fan uncertainty among investors. German Social Democratic chancellor candidate Peer Steinbrueck, Schaeuble’s predecessor as finance minister, has said that Schaeuble’s remarks that Greece will need additional funds are proof the government’s crisis policies aren’t working.
Even so, Steinbrueck at a press conference in Berlin today said he shares Chancellor Angela Merkel’s skepticism and “extreme reluctance” on a second debt cut for Greece. Any writedown of publicly-held Greek debt faces “considerable difficulties” not least because of the bonds held by the European Central Bank, he said.
--With assistance from James G. Neuger in Brussels. Editors: Alan Crawford, Leon Mangasarian