ATHENS – The ink isn’t dry yet on a second bailout to save Greece – this one for $172 billion after a first for $152 billion didn’t slow the country’s slide toward default, but the international lenders putting up the money said they now believe a third will be needed in three years, this one for at least $66 billion, a combined trio of loans that will pile $390 billion of debt onto the country.
The German magazine Der Spiegel reported the need for another rescue package, less than two weeks after Eurozone chief Jean-Claude Juncker, who oversees the 17 countries using the euro as a currency, also said he thought Greece might not be able to recover without more help, as attached austerity measures have created a deep recession of 21 percent unemployment, closed more than 111,000 businesses and made fearful Greeks cut back or stop spending, driving down tax revenues despite an avalanche of new tax hikes on them. German Finance Minister Wolfgang Schaeuble, who wants a European commissioner to take over Greece’s economy, also had said he thinks Greece will need more money.
Der Spiegel said officials of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) Troika estimate Greece is still short of it needs to keep the economy afloat between 2015-2020. Citing from the most recent draft report of the Troika in Greece, the magazine said in a pre-released report of its March 5 edition that it’s not guaranteed that Greece will be able to return to the market and raise funds already in 2015 and that’s why the country might have an “external financial need of up to 50 billion euros,” equivalent to $66 billion. The magazine also reported that the ominous warning was deleted from the Troika report due to pressure from the German government, which has been backing more loans to Greece in the face of vociferous opposition from Germans, whose country proportionately puts up most of the rescue monies.
The second bailout depends on a debt restructuring agreement being worked out with private investors, most of whom have already agreed to take a 74 percent loss and give Greece 30 years to pay back what it owes, although Greece had to agree to put the contracts under English law as EU officials said they have lost trust in the government.
On Feb. 24, asked in a television interview if he could be sure Greece would not need a third bailout, Juncker said: “You cannot really exclude that, although we should not have as a starting assumption that a third program will be (needed).” He added that while the third bailout had been okayed pending the so-called Private Sector Involvement (PSI) agreement being finalized, that, “I have good reasons to believe that we should now not engage ourselves in a debate on a ‘maybe’ third program. We should now … implement the second one,” he told David Frost on Al Jazeera. Asked about some experts’ view that a Greek default is inevitable, Juncker said: “I don’t see that Greece would go for a default.”
The Eurozone everything to avoid a disorderly default by Greece, which would have had “tragic consequences, not only for Greece, but for the whole euro area as such,” he said. On whether Greece would succeed in staying in the euro zone, Juncker said: “You can never exclude a new crisis although I do consider that, being at the epicenter of the global threat, we are slowly regaining safe territory.” He said doubts remain, however, now being echoed again. “We were not really rejoicing when we were concluding the deal. Nobody was dancing on the table … We had to deliver in order to restore stability in Greece and credibility around Greece,” he said.
Greece’s interim Prime Minister Lucas Papademos, a former ECB Vice-President overseeing a hybrid government of former ruling PASOK Socialists and their bitter rival New Democracy conservatives, said earlier this month after the second bailout was struck in the face of furious protests by labor unions and workers that he believed it would lead to a recovery. “Growth is now Europe’s top priority. Decisions have been taken that will promote growth. This will help Greece exit from the crisis and will help with our fiscal consolidation,” Papademos said, the newspaper Kathimerini reported.
Papademos said that as long as Greece’s economy – which shrank by 7 percent of GDP last year — continues to contract and unemployment rises, efforts to reduce the country’s public deficit and debt would be undermined. The Greek premier said it was time to end the “vicious cycle” that the Greek economy finds itself in as a result of repeated austerity measures. “By mid-2013, we might start seeing the signs of recovery,” he said.
Kathimerini said that he identified several steps that could be taken to improve economic conditions in Greece: better use of structural funds, the completion of several highway projects, the recapitalization of Greek banks, more focus on renewable energy, exploration for fossil fuels, and improvements to tax collection as well as reform of the taxation system. “We need a stable, simple and socially just tax system,” Papademos said, adding that the new tax scheme would probably be ready in the middle of this year. Tax evaders have cost the country more than $60 billion in lost revenues and the number increases each year while the government is relying on cutting worker salaries, increasing taxes, slashing pensions and planning the firing of 150,000 government employees over the next three years in a desperate attempt to keep from defaulting.