German Finance Minister Wolfgang Schauble said that Europe is better prepared for a Greek default than two years ago, jacking up pressure on Greece to hold to its pledges and find the savings needed to win a second bailout.
Euro-area finance ministers are due to convene in Brussels on Wednesday for their second extraordinary meeting in a week after telling Greek officials to identify additional cuts of 325 million euros ($428 million). The measures are among the conditions that must be met by tomorrow for Greece to secure a 130 billion-euro rescue needed to avert financial collapse.
“We want to do everything to help Greece master this crisis,” Schauble said in an interview with ZDF television late on Monday. “What we’re experiencing at the moment is much less bad than what may happen to Greece if the attempts to keep Greece in the eurozone failed.” Yet if everything fails, “we’re better prepared than two years ago,” he said.
Germany, the largest contributor to euro-area bailouts, is losing patience with Greece as Europe’s most indebted country threatens to drag the region’s economy into recession more than two years after the sovereign debt crisis first emerged.
While political leaders in Berlin and Brussels welcomed passage of austerity measures in the Greek parliament on Sunday, they said that extra steps still need to be agreed upon, and pledges fulfilled. German Chancellor Angela Merkel signaled that no more money will be made available beyond the 130 billion euros, saying “there can’t and won’t be any changes to the program.”
Greek leaders have been told they must provide written assurances of their support for measures and policies in return for new financing, the government in Athens said.
“We can and want to help only if there is a quid pro quo on the Greek side,” German Economy Minister Philipp Roesler said on February 12 in an interview with ARD public television. If not, the “day X” of a Greek default “has lost much of its horror.”
Greek products are too expensive, with a minimum wage that exceeds the euro-region average, Schauble said. It “has long lived beyond its means and must urgently develop a competitive economy,” he said.
Greek bureaucracy is strangling the bailout aid before it can be put to proper use, Volker Kauder, the parliamentary floor leader of Merkel’s Christian Democrats, said in an interview on Deutschlandradio on Tuesday.
Greece is being subject to an “overdose of austerity” with the result that “we will likely see more many more tense moments in Greece, with a very serious risk that Greece will eventually have to leave the euro,” Holger Schmieding and Christian Schulz of Berenberg Bank in London said in a note.
German and other policymakers have made clear that “support for Greece could be cut off at any time if the country fails to implement the harsh program,” the economists said. [Bloomberg]