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Leaked: Germany says 3rd Greek bailout worth €10-20bln

Published time: February 03, 2014 09:27
Edited time: February 05, 2014 16:40
AFP Photo/Louisa Gouiliamaki)

AFP Photo/Louisa Gouiliamaki)

The next financial lifeline Greece will receive from Germany and its European lenders will be worth €10-20 billion, the German magazine Der Spiegel reports, citing a document leaked from Berlin’s finance ministry.

The rescue package, which will be the third for Europe’s most troubled economy, is considered “extra aid” by German Finance Minister Wolfgang Schauble, who said the sum would be “far smaller” than the €240 billion is has already received from international lenders.

"What is sure is that any further aid would be much less expansive than whatever help [has been given] so far," Schauble told the German finance magazine Wirtschaftswoche.

Schauble first hinted Greece would need a third rescue loan in August a risky move right ahead of Germany’s September elections, in which Chancellor Merkel’s CDU party won comfortably.

Manufacturing revival?

On Monday Greece’s Purchasing Manager Index (PMI) showed manufacturing expanding for the first time in 5 years. The January benchmark PMI index - the key barometer of business conditions – passed the headline 50 –points mark, going up to 51.2 from 49.6 in December. On a scale of a 100, a PMI reading above 50 points to expansion.

Workers pack bottles of olive oil at the Gaea extra virgin olive oil factory near the town of Agrinio about 350 km northwest of Athens (Reuters/John Kolesidis)

While the levels of output volumes and new orders increased strongly, jobs kept being lost, which puts a fully fledged recovery in question.

Two other leading indicators - economic sentiment and consumer confidence – produced a mixed picture last month, according to European Commission data. While economic sentiment improved by 1.2 points to 92.6, consumer confidence was down by the same 1.2 points to -64.5.

Opposing views

Europe’s biggest economy has been at odds with the IMF and other Troika members over a Greek debt write off.
Even after receiving the biggest bailout in European history, the Greek economy continues to contract, and it is the most indebted country in the eurozone, with debt totally 176 percent of gross domestic product.

"They are missing the point: Greece does not need a third bailout, it needs debt restructuring," Giorgos Stathakis, an economics professor and member of the Greek parliament, is quoted by The Guardian.

The IMF has admitted it has made mistakes in its handling of the crisis in Greece. Germany has so far been the biggest lender to troubled European economies.

The International Monetary Fund has forecast Greece's funding needs for 2014-2015 at 10.9 billion euro, and Greek Finance Minister Yannis Stournaras has publicly estimated a similar sum for the third bailout.

Pensioners shout slogans during an anti-austerity rally in Athens June 6, 2013. (Reuters/Yorgos Karahalis)

‘Rigorous’ austerity

Greece continues to implement its “rigorous” austerity measures, which include major job cuts in the public sector, wage and pension cuts, as well as the privatization of state assets.

Unemployment in Greece is amongst Europe’s highest at 27.8 percent, compared to the 28-member nation average of 12 percent. Youth unemployment is over 60 percent.

Six years of straight recession has hit the economy hard, and now the country is experiencing severe deflation; prices have hit 50-year lows, and disposable incomes have diminished by a third since the country dipped into recession.

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