Third Greek Loan Mooted

The German people go to the polls in five weeks to pass their verdict on Chancellor Merkel and her government. Like the people in all democracies, German citizens don’t feel themselves to be responsible for the economic mess that their “leaders” have got them into. They have the power to make their displeasure felt by electing an opposition party and sending the current government into the political wilderness.

As the powerhouse economy of the Eurozone (and the wider EU), it contributes most to the bailout funds used by Portugal, Spain, Ireland, Cyprus and Greece. Consequently, there is widespread belief that it is the German taxpayer who is footing the bill and they are none too pleased to be paying for other people’s lack of economic nouse. The reality is that recipients of such bailouts have to pay interest on the funds that they receive and agree to stringent conditions, but that does not deflect public conceptions.

Germany’s finance minister, Wolfgang Shraeuble, has publically stated that Greece will need a further, much smaller loan to get it through 2015-16. The IMF estimate that this loan would need to be €11 billion – small potatoes when compared to the €240 billion already loaned to them. Angela Merkel’s position is that it is too early to assess Greek needs – unless Schraeuble is appealing to the ethnic Greek-German vote, this would seem to be an own goal in the run-up to the 2013 German general election.

Funding of Greece’s existing loans are conducted via tranches with the approval of a “troika” of ECB, IMF and EC officials which pass on their recommendations to EU finance ministers. The troika is required to ensure that Greece is making adequate progress on the reforms which were conditions for the loans.