German Chancellor Angela Merkel, Europe's reluctant paymaster, said on Tuesday she could only discuss further aid for Greece after EU and IMF officials report on implementation of its existing rescue plan. Speaking to foreign correspondents in Berlin, Merkel did not rule out additional funding for Athens, or a possible further easing of terms on its 110 billion euro ($157 billion) bailout, and she voiced confidence that the German parliament would back a permanent bailout mechanism for the eurozone.
"I need to analyse the findings of the European Central Bank, European Commission and International Monetary Fund first and I can't comment before that," she said. "Anything else would not help Greece or Europe."
A source with direct knowledge of the joint inspection mission visiting Athens said EU and IMF officials had not yet concluded whether Greece had met targets required to receive the next tranche of aid under its existing aid deal. He stressed the inspectors were not discussing a new bailout package with the Greek government, which has acknowledged it may not be able to return to capital markets next year as planned.
A eurozone source in Brussels said Greece first needed to show credible progress on meeting agreed targets for fiscal consolidation and privatisation of state assets before further emergency funding could be considered. "There is no question about a new bailout package for Greece - it is about implementing what has been decided and announced," the source said, adding that there was also no discussion about lower rates for Greece's existing loans.
German Finance Minister Wolfgang Schaeuble told conservative lawmakers that fresh assistance to Greece could involve further extending loan repayment periods and cutting interest rates, participants at the closed-door meeting told Reuters. Schaeuble also vehemently rejected calls by Eurosceptical critics for Greece to leave the eurozone, saying "everything would be better than an exit".
A source in Berlin's ruling coalition said EU finance ministers were talking about "reprofiling" Greece's existing bailout loans with the voluntary inclusion of private investors. However, he said there was no mention of a new 60 billion euro ($85 billion) aid package, which Dow Jones Newswires and business daily Handelsblatt reported was under preparation.
French Economy Minister Christine Lagarde, asked about more aid for Greece on a visit to Zurich, said: "We have been rescuing for a year and we will keep up." She gave no details. In Strasbourg, EU Monetary Affairs Commissioner Olli Rehn said it was premature to talk about a new package for Greece now but he expected a decision in a few weeks' time on the next steps to tackle Athens' refinancing needs.
Euro zone markets steadied amid growing expectations that Greece will receive additional aid to avert an early debt restructuring that could force investors to take heavy losses. But Greek and EU officials said reports that Athens would get a second bailout of 60 billion euros next month were either plain wrong, or at least highly premature, insisting talks on further assistance were only at an exploratory stage.
Analysts said the figure was merely a reflection of the amount that Athens is meant to raise on capital markets in 2012 and 2013 under its current EU/IMF programme. But Greece paid an increased yield of 4.88 percent to sell six-month treasury bills on Tuesday to refinance maturing debt, higher than last month and well above the 4.2 percent average rate on its IMF and EU loans.
Austrian Finance Minister Maria Fekter was quoted as saying Greece might be given longer to repay 110 billion euros in loans under its existing EU/IMF rescue plan, and the interest rate could be cut again but rejected any thought of restructuring. The chairman of eurozone finance ministers, Jean-Claude Juncker, said after policymakers met last Friday there was consensus that Greece would need a second adjustment programme.
Slovakia's prime minister, Iveta Radicova, told Reuters Insider restructuring of Greece's debt would become inevitable at some point, and the private sector should be involved. "The crisis in Greece is so deep that without such steps, any kind of only financial instruments is not helpful," she said.
Yet ECB policymakers kept up a barrage of dire warnings against such a move, despite widespread market expectations. ECB governing council member Ewald Nowotny of Austria said Greece should be given more time to repay financial aid rather than issuing new loans. A restructuring "would immediately have massive consequences for the Greek banking system and for the banking system overall," he told Austrian radio. "That would only heighten the crisis." ECB executive board member Lorenzo Bini Smaghi said a eurozone debt default or restructuring would be "political suicide".
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