Greece May Require Third Bailout in 2014

By: EW News Desk Team   Date: 22 August 2013

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22 August 2013

Officials from the European Central Bank arrived in Athens on Wednesday for a check on whether Greece was meeting conditions for a scheduled tranche of aid in October, a visit that comes a day after German Finance Minister Wolfgang Schauble admitted that Greece will need a third bailout soon to stay afloat.

Schauble did not specify what form the new aid should take, but ruled out a write-down on Greece’s public debt, which is now mainly bailout loans owed to other European governments.

Speaking on condition of anonymity, a Greek finance ministry official told Reuters that any new bailout would involve sums far smaller than the 240 billion euros already granted by the International Monetary Fund, the European Central Bank and the European Union, and would focus on plugging the expected funding shortfall over 2014-16. The finance ministry says about 4.5 billion euros will be needed in 2014 and another 5 billion euros in 2015.

Last month, the IMF predicted that Greece will need around 11 billion euros in 2014-2015. Calling the expected shortfall a “test of European Support”, the IMF added that finance ministers from the 17 euro countries have already begun discussions on plugging financing gaps.

Related: Greece To Receive $2.3bn IMF Bailout Payment

Related: IMF Admits to “Notable Failures” in Greece Bailout

Related: IMF Chief Economist Admits To Austerity Mistake

Speaking in Athens on Wednesday, ECB board member Joerg Asmussen said he had not discussed the possibility of another bailout during talks with senior Greek officials. His immediate priority is whether Greece has made progress on reforms, deficit cutting and shoring up its banks before the next tranche of aid is released in October.

Greece “must continue the reforms it has started,” Asmussen said, adding that the easing of Greece’s recession in the second quarter provided “the first signs of stabilisation” and that there had been progress in public finances.

Asmussen reiterated the eurozone's pledge last year to support Greece until it can tap markets again, provided it sticks to its current bailout obligations and posts a budget surplus before interest payments.

Related: EU Officials Threaten To Hold Back Funds As Greece Fails To Enact Reforms

Related: Greece Recession Eases As Government Eyes 2013 Budget Surplus

"This is a decision taken in November last year, it is public knowledge, and there's nothing new and there's nothing to add," he said.

European Union Monetary Affairs Commissioner Olli Rehn declined to rule out the possibility of a third bailout for Greece, though he stressed that Athens has several options if the existing aid deal is not enough.

"(Greece's) debt sustainability can be improved for instance by extending the loan periods on existing rescue loans," Finnish daily Helsingin Sanomat quoted Rehn as saying on Wednesday.

Related: EU, IMF Clash Over Botched Handling of Greek Bailout

Related: Germany Rejects Calls for Greek Debt Haircut

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