German Finance Minister Wolfgang Schaeuble, a hardliner who insists Greece stick to harsh austerity measures in return for bailouts – much of them funded by his country – will be in Athens on July 18 and is to sign an agreement for government-owned development bank KfW to provide capital for the creation of an investment fund in Greece.
The fund, set to be called the Institution for Growth in Greece, will have initial capital of 500 million euros ($656 million) of which 350 million euros ($457.4 million) will come from European Union structural funds and Greece’s public investment program.
The rest will be provided by KfW and the European Investment Bank. It is expected that the German state lender will put up around 100 million euros ($130.6 million) since any larger amount would need the approval of the country’s Parliament and Chancellor Angela Merkel is anxious to avoid any anxiety about Greece as she faces a critical re-election campaign with her party in September.
The Greek government is also hoping that it will be able to lure France, through its state-owned investment group Caisse des depots et Consignations, Diaspora Greeks, through the Hellenic Initiative, and charitable organizations such as the Niarchos and Onassis Foundations to become shareholders in the fund.
That could be a tough sell as a previous government imposed 74 percent losses on investors , including small bondholders in the Diaspora who put their faith as well as their money in their homeland only to get burned. Prime Minister Antonis Samaras has reneged on a promise to hold them harmless and the courts have upheld the government’s right not to pay back investors in full.
If the deal is sealed, it could warm relations somewhat between the Greek government and Schaeuble, who have been sparring recently over his rejection of any sense that public investors will take a so-called “haircut” too which would mean taxpayers in other Eurozone would pay for Greece’s decades of wild overspending and let the government walk away from much more of its debt.
In September 2011, the German finance minister offered his Greek counterpart at the time, Evangelos Venizelos – the PASOK Socialist leader who is now Deputy Prime Minister in Prime Minister and New Democracy Conservative party leader Antonis Samaras’ government – the option of Greece leaving the euro, for which Germany had been preparing. At that time, Schaeuble blistered Greece with criticism for mismanagement and said its inability to reform was costing Germany billions of euros.
Schaeuble is also scheduled to meet with Samaras, Development Minister Costis Hatzidakis and Finance Minister Yannis Stournaras, with whom he enjoys a good relationship, during his visit.
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