• Germany's news in English

Schäuble warns Greece to reform for bailout

The Local · 20 Jun 2011, 10:29

Published: 20 Jun 2011 07:55 GMT+02:00
Updated: 20 Jun 2011 10:29 GMT+02:00

Facebook Twitter Google+ reddit

His remarks followed a Sunday meeting of the 17 eurozone finance ministers, who agreed to hold off releasing the next €12 billion tranche of the bailout package until July. They are demanding the troubled Mediterranean nation pass austerity measures through its parliament including the privatization of public assets.

“First, Greece must fulfil the conditions. Then we can decide on a new programme so that the payout of the next instalment is possible,” Schäuble told broadcaster Deutschlandfunk.

If the country wouldn’t or couldn’t carry out the reforms, “this path cannot be taken,” he said.

The clear warning increases the pressure on Greek Prime Minister George Papandreou, who is trying to drum up support for his austerity measures to keep the bailout money flowing from the European Union and International Monetary Fund despite being besieged by public protests and dissent in his own party.

Schäuble also called on private creditors such as banks and insurance companies to voluntarily accept their share of the burden of a second Greek bailout package that is being negotiated. It was not in their interests for Greece to fall apart, he said.

The finance ministers in Brussels backed a plan for private investors to voluntarily bear some of the cost of the next Greek debt bailout. With the current bailout package no longer expected to be sufficient to keep Greece afloat, a second package, likely to total about €110 billion, the same as the first, is now being negotiated.

Under pressure from France, Germany watered down its original demand that private investors as well as taxpayers bear some of the brunt. The ministers in Brussels supported this compromise, stressing that private participation must be voluntary to avoid any perception that Greece is defaulting on its debt – which could destroy its international credit status.

“We have agreed that there should be a private-creditor participation, which should really be voluntary because we want to avoid any credit default or credit event,” Euro Group president Jean-Claude Juncker told reporters Sunday night, according to business news wire Bloomberg.

“But it also has to be clear that Greece has to bring about a situation where all the expected commitments are taken charge of. We depend very much that all legal processes are approved before the end of this month. Beginning of July we will have to continue to discuss the private creditor participation, which will be voluntary and we will have to check whether Greece has fulfilled all its obligations.

“Voluntary participation has to be voluntary which means that no pressure whatsoever can be exercised on the private sector.”

Germany had wanted a forced participation, which effectively would have amounted to a controlled default by Greece. On Friday, Chancellor Angela Merkel backed down and announced jointly with French President Nicolas Sarkozy support for a voluntary contribution.

The question now is whether enough banks and other large investors can be persuaded to voluntarily accept a so-called “rollover” of the Greek bonds they own, which would typically involve an extension on the term of the bonds or a pledge to buy new, repackaged bonds.

Story continues below…

Juncker said another meeting would be held in early July to discuss details of the plan, he said. He also said it was impossible at the moment to predict how great a voluntary contribution would be.

“With a voluntary contribution by private creditors, one can’t predict in advance the size of this participation. This has to be discussed also with the private creditors.”

Papandreou faces a confidence vote in the Greek parliament on Tuesday night over his new cabinet, which he appointed to handle the current crisis. Juncker said the finance ministers in Brussels “reminded the Greek government forcefully that by the end of this month they have to work so that we are all convinced that all the commitments they made are fulfilled.”

The Local/djw

The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

08:28 June 20, 2011 by William Thirteen
'including the privatization of public assets.'

i am sure a few friendly banks can take those off your hands at a reasonable price. perhaps you have some of your grandmother's jewelry you might consider parting with as well?
10:23 June 20, 2011 by jg.
"... to avoid any perception that Greece is defaulting on its debt ­ which could destroy its international credit status."

That horse has already bolted.

Even if Greek debt offers returns of over 17%, investors are not going to see that payout and are unlikely to ever see all the money they "invest". All the talk of "haircuts" and "forced participation" has only made things worse.
10:31 June 20, 2011 by harcourt
Who ever heard of banks, insurance funds and private investors ever VOLUNTARILY handing out money in a philanthropic way !!! No the only reason they will give up some of their ill-gotten gains is when there is a danger that they will be dragged down as well !!
10:35 June 20, 2011 by mashlakhito
HA! The Greeks will look like they are reforming, take the 12bn of this bail-out, take the 112bn of the second bailout and tell you: "See you later, fools!"

Every country should go back to its own currency and let the fittest survive and not have to worry about the weakest, particularly when the weakest doesn't play within the rules of the group!
11:03 June 20, 2011 by elboertjie
NO more bailouts! Enough is enough!

Taxpayers should NOT pay for the mistakes of the Greek bondholders; the banks that purchased the Greek bonds knew they were more riskier than German bonds, so let them take the risk for the losses.

No more bailouts; bailouts makes all of us poorer.
11:52 June 20, 2011 by Lachner
These bailouts are a joke! Obviously, not all countries have the same financial discipline and efficiency required to be stable, so these crises will just continue to happen until the European Union is broke and all countries will have to return to their own currency. The problem with Greece is not only about lack of economic reform and control, but also about government corruption, greed and theft.
12:16 June 20, 2011 by Eastard
Most everyone gave Merkle blame for not bailing Greece out a short while ago... She was right to know that Greece was not really going to change anything and it was a financial play.. Here we are later and they are still playing as though there was a choice for change... It will be bad for all if they fall however letting them off the hook would be worse... Countries need to know they can fail and need to behave accordingly... It is partly the fault of democracy where the elected officials manage against popular interest... often not a good choice...and especially when it is long term...
12:58 June 20, 2011 by William Thirteen
odd. it seems that some of us are still under the impression that these goverments are working for the taxpayers rather than the bankers. silly, silly, silly.

actually, given that Goldman Sachs worked with the Greek government to cook their books, the argument could be made that the investors didn't know that they were riskier than Bunds.
13:04 June 20, 2011 by dcgi
Give me a break, "decisive economic reform" .. that won't matter the Greeks love to cheat others, it's institutional, whether it be on their tax-returns, cheating their way into the Euro or lieing about how much debt they really have, giving them €12B should only be done if it's going to prevent other countries from being affected negatively, not just if it's to help out Greece, they made their bed and now they have to lay in it.
13:34 June 20, 2011 by melbournite
Yes, do please be firm Minister Schäuble. If you push a bit harder you really will tip things over to revolution in Greece. And dont think it will stop there. The spirit of revolution is already visible in Spain also. Your corrupt little Euro-party has come to an end and the people are not going to pay for your banking buddy excesses
16:23 June 20, 2011 by marimay
I warn Greece to escape the EU.
16:42 June 20, 2011 by derExDeutsche
The Greeks financial house is in a shambles. Unions, entitlements, a lack of industry, pensions, ever growing debt, etc.

How are Bankers responsible for that ? Lol. Ill gotten gains? hahaha. Yeah, like the ones Greece is about to receive from the more responsible parts of Europe .. Socialist;). They love to mortgage the farm, default on payments, then burn down the bank. little changes.
21:35 June 20, 2011 by melbournite

* Banks make dodgy loans and go bust bringing down world economy

* Governments used our taxes to bail out said banks - without asking us

* Now those same governments say's "ooh look, no more tax dollars for pensions, schools etc"

do try to keep up
05:33 June 21, 2011 by consumerxy
IMF Economists along with incompetent politicians who missed the biggest meltdown of the worlds economy in 80 years are in charge of this? These same economists who will retire with 6 figure pensions in their 50's and not one of them lost their jobs or even a demotion. Here is the exposure of the banks(youfooltaxpayer), Germany=20Billion,France=16Billion,UK=4Billion and plus what they are not telling you. One in six Greeks have no job, 50,000 business went under last year, and Greek politicians are hiring bodyguards because they really need them to just walk around. We in the USA will be lucky to regain our housing loses in ten years. With our incompetent politicians demanding a debt freeze when a anyone who runs a business knows that you need a line of credit to get you through the bad times. Our moron politicians will cripple our fragil recovery and turn us into a no growth Japan or worse. You on the other side of the Atlantic have politicians from 27 different countries plus the IMF economists screwing you, I wish us luck my friends.
22:41 June 21, 2011 by mkvgtired
@William Thirteen, What Goldman Sachs did with the Greek government is very common with many European sovereigns that issue debt in foreign currencies (i.e. USD, JPY). Clearly it worked in hiding the severity of the coming Greek crisis, it lowered their public debt to GDP ratio from 105.3% to 103.7%. A whopping 1.6% ten to eleven years ago! Sorry, you only have the Greeks and their outrageous spending to blame for this one.

And please don't be snide. Anyone that knows the definition of the word "economics" and has a functioning brain between their ears knows Germany's bonds are far less risky than Greek bonds.

17:54 June 22, 2011 by koll
If Europe threaten Greece to recognize North Cyprus, Greece certainly will pay every cent of her debt. 60 % of Greece land belongs to government.If Greece privatize 10 % of her lands debt problem could be solved.

If Greece defaults many European Banks will go bankrupt, whether people or companies lost their bank deposits or governments face big debt burden to bailout them.

Greeks abuse Europe by lie and now threaten to default to get more money.

If North Europeans not stand firm on greeks, Spain Italy Portugal will declare bankruptcy due to public pressure rather than paying debts.

This will bring trillions of extra burden to North Europeans.
Today's headlines
Anger as Berlin scraps Turkey concert on Armenia genocide
The Dresden Symphony Orchestra. Photo: DPA

Germany's foreign ministry Tuesday scrapped a planned symphony performance on the Armenian "genocide" in its Istanbul consulate, sparking accusations that it was caving in to Turkish pressure.

Obama to visit Berlin in last presidential trip to Germany
President Barack Obama and Chancellor Angela Merkel during a Berlin trip in 2013. Photo: DPA.

The White House announced on Tuesday that US President Barack Obama will be paying one last unexpected visit to the German capital - his last before he leaves office.

Hostility towards minorities 'widespread in Bavaria'
A village in southern Bavaria. Photo: DPA.

Hate and hostility towards groups deemed to be different are not just sentiments felt by fringe extremists, a new report on Bavaria shows.

Hated RB Leipzig emerge as shock challengers to Bayern
RB Leipzig. Photo: DPA

RB Leipzig's remarkable unbeaten start to the Bundesliga season has seen them suddenly emerge at the head of the pack chasing reigning champions and league leaders Bayern Munich.

Munich taxi driver in hospital after attack by British tourists
Photo: DPA

A taxi driver had to be hospitalized in Munich on Monday evening after three British tourists refused to pay their fare and then attacked him.

German police carry out nationwide anti-terror raids
Police outside a building in Jena during raids on Tuesday. Photo: DPA

Police forces in five German states carried out raids on Tuesday morning with the aim of tackling the financing of terror groups, police in Thuringia have reported.

The Local List
10 ways German completely messes up your English
Photo: DPA

So you've mastered German, but now it's time to learn English all over again.

Iconic German church being eroded away by human urine
Ulm Minster towering over the rest Ulm surrounding the Danube. Photo: Pixabay

It will now cost you €100 to spend a penny. That’s if you get caught choosing to pee against the world-famous Ulm Minster.

German small arms ammo exports grow ten-fold
Photo: DPA

The government has come in for criticism after new figures revealed that Germany exported ten times the quantity of small arms ammunition in the first half of 2016 as in the same period last year.

14-year-old stabs 'creepy clown' in prank gone wrong
File photo: DPA.

A 16-year-old in Berlin decided he wanted to scare some friends, but his plot backfired in a violent way.

Germany's 10 most weird and wonderful landmarks
Sponsored Article
Last chance to vote absentee in the US elections
10 things you never knew about socialist East Germany
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd