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No haircut for Greece but maybe third bailout, Schaeuble tells Kathimerini

 'Anyone who wants to stay in the eurozone must follow the rules,' German finance minister says
German Finance Minister Wolfgang Schaeuble pictured at Zappeio Hall.

By Xenia Kounalaki

German Finance Minister Wolfgang Schaeuble does not rule out the possibility of a third bailout deal for Greece in order to cover the country's funding gap over the next two years. Though he is reluctant to spell out the size of such a loan, he does say it would be “much smaller” than the first two the country received from its international creditors.

Schaeuble detests the term “haircut” for describing debt reductions and repeats the phrase “Never again” two or three times during an interview with Kathimerini this week, when he was in Athens for the Ecofin meeting. He does not rule out, however, the possibility of another form of debt restructuring.

He talks about his discussions with Evangelos Venizelos when the latter was Greek finance minister and admits that he was in Athens – just as German Chencellor Angela Merkel is due to be next week – in order to show German support for Greece.

As far as the leftist opposition SYRIZA party is concerned, Schaeuble has a clear message for its leadership: “Anyone who wants to stay in the eurozone must follow the rules.”

The biggest question for Greece after the European elections is how it proposes to cover the funding gap for 2015-16. I know that you are exploring various options, but which is the likeliest? A third bailout?

We already said after the approval of the second program for Greece that we would explore the options at some point in the middle of this year, once we had the necessary data and could check it. In the case that further funding is needed, we will see how to deal with it with the Greek government. It is not the time to make decisions right now. We need to wait to see the developments in Greece. Already we are seeing that the public finances are better than the program had foreseen. Consolidation has been rapid and better than expected. It is not at all unlikely that Greece will be come out of the recession this year. In any case, Greece can depend on us, the Europeans, to keep our promises. I know the discussions and concerns that Greeks have about the imposition of reforms attached to the programs. The terms of a new program, however, would certainly be much lighter.

So there will be terms.

Help from the European rescue mechanism can only come with conditionality. But this obligation for a commitment to reforms served one purpose only: to bring growth to Greece.

If there is a gap, how big do you think it could be?

It would be wrong to make assumptions and to speculate at this point.

Between 10 and 15 billion euros?

The amount being discussed would certainly be much smaller that the first two programs.

What do you see the IMF's role being in the future?

We place great importance on the continued presence of the IMF because it has provided invaluable assistance in dealing with the crisis since 2010. But the IMF has its own rules and things are not always simple. The IMF's enormous know-how acts as a balancing factor. In the case of Ukraine, everyone immediately said that the IMF should have the leading role.

The second big question is how Greece's debt will become sustainable. How do you propose this be achieved? With a new haircut? Do you believe that the target for 124 percent of GDP by 2020 is attainable without a new haircut?

Yes. We designed a realistic program two years ago and today's numbers are better than those outlined in the program. This is why I don't see that there will be a need for additional action at this point. The 53 percent writedown on privately held Greek debt was right for the time when it was decided. I spent a lot of time over this issue. I fought some tough battles. Together with and with a lot of compassion for the Greek government. The finance minister at the time was Evangelos Venizelos – we fought battles against everyone else, including the European Central Bank, until we succeeded. Many said, “This will be a disaster.” Nothing happened. But it was a unique case and it must remain unique.

Could we be looking at some kind of restructuring of the debt by lengthening its maturity and decreasing its interest, rather than a haircut?

I despise the term “haircut.” And I repeat: It was a unique case. That is what the heads of states and governments decided. We also explained that we would help if the need arose. We all have an interest in Greece succeeding. Europe is strong only when everyone is strong.

You mentioned Venizelos earlier. He has repeatedly referred to a discussion between the two of you in Poland when he was finance minister, and in the presence of former Finance Ministry general secretary Giorgos Zannias and the ECB's Jorg Asmussen, about a possible Greek exit from the eurozone. Is this true? And is the “Grexit” scenario definitely off the table now?

What happened was this: When then-Prime Minister [George] Papandreou announced in October-November 2011, just before the summit in Cannes, that he was planning to carry out a referendum, I said, “This is Greece's decision.” The referendum never happened, but this is a different matter. I told the German parliament at the time the same thing: that as long as the Greek people are prepared to take on the cost that comes with participation in the eurozone, we will stand by their side. But if they decide they can no longer do it, we will respect that also. We will respect the sovereign decision of the people, whether this is taken in a referendum or via the parliament.

Do you believe the referendum proposal was a good idea?

I will not comment. It is not my role to oversee other countries. I am just the German finance minister. We are partners and we are equal. I uphold the commitments we have made. I had discussed all this with Evangelos and he said, “No, we want to stay in Europe.” I also believe that this was the right decision. From 2010 I stressed to the German parliament, “The adjustment is coming at a huge cost to the Greek people.” We had huge problems ourselves in the past.

Not this big, though. I assume you are talking about a decade ago, when Germany was the sick man of Europe.

No, that's not what I mean. I was just remembering a night, one of those spent worrying about Greece, when a colleague from a Baltic country turned to me and said, “My people had to go through much more and try much harder to walk the path from the former Soviet Union to the EU.” Greece is suffering because of the mistakes of past decades. I once spoke to [SYRIZA leader Alexis] Tsipras very openly about this issue.

What do you think will happen if SYRIZA wins the next elections?

Then SYRIZA will have to face the same questions that Mr Papandreou did. Anyone who wants to stay in the eurozone must follow the rules. But I would not like to become involved in a discussion about Greece's domestic politics.

In the first two years of the crisis you were extremely strict toward the Greeks. Several times you said that we were living beyond our means, that we had to do our homework etc, at a time when anti-German sentiment was already quite acute here. Do you think that the program was adequately explained to the Greek people? You hardly ever spoke to the Greek media.

I spoke to the Greek media that wanted to speak to me.

It took me quite some some to arrange this interview.

Yet here we are, talking. I don't rank countries and I don't want to appear patronizing, but everyone needs to live up to their responsibilities. If there are politicians in Greece who argue that Europe or the German finance minister are responsible for the country's problems, then I disagree.

I still have the feeling that Germany did not try hard enough to show its understanding for the Greek people.

Maybe you're right. But you cannot rule out that there were those who simply didn't want to hear it. There are politicians in Greece who say that if Germany pays World War II reparations the debt will be even.

That is another question I wanted to come to. That is one of the things SYRIZA says. It also refers to the loan Greece was forced to give to Germany in the Second World War. Do you think these issues are closed?

The German President [Joachim Gauck] was here recently and he apologized on behalf of Germany and said that maybe we Germans have not understood how much Greece suffered at the hands of Germany during the Second World War. But the material reparations have already been settled through international treaties.

Is the huge unemployment rate in Greece and other European periphery countries a national or a European problem and can it be dealt with through a coordinated European strategy?

Unemployment in Europe, not just in Greece, and especially among young people, is our biggest problem. We need to improve competitiveness and in this way create the conditions for new jobs. Maybe very few people have understood that in a globalized market competition becomes increasingly tougher and that labor is much cheaper in other parts of the world.

So what is the solution? Ever-smaller salaries?

More innovation, less bureaucracy and European policy that will not hinder every step toward modernization with a plethora of regulations. Greece, for example, could produce solar energy at a more competitive price than Germany, on the condition that the relevant networks are built. Greece could become a strong communications hub. It does not need to be just in Istanbul; it could easily be in Athens as well. Shipping is an area where the Greeks have invariably done well. Tourism is growing again, but here too things could be much better. Many Germans came to Greece again last year. Things were different in 2012 and I hope that even more come in 2014.

Do you mean because of the tension in bilateral relations?

No. Greece was simply too expensive. Now the situation is better. The infrastructure and the deals need more improvement though.

Before the German elections, the Social Democrats drew up a kind of Marshall Plan for Greece. What do you think of the idea?

Maybe it was a good idea for the Social Democrats' pre-election campaign, but if you look at the numbers of the Marshall Plan you will see that they would not get you very far today. We are doing a lot more right now. The Marshall Plan was an initiative to help rebuild Europe, which had been completely destroyed.

Greece, socially at least, has also been destroyed.

I would gladly show you some photographs from that time that show the situation in Europe, in Athens and in Germany, in 1947. We should be happy and grateful that we are not facing such a situation today. There really is no comparison. That is why the term “Marshall Plan” is extreme.

Many analysts argue that Germany's insistence on fiscal discipline is the main culprit behind the worst postwar recession that Greece has ever experienced. Any second thoughts on the program? Is there anything you would change if you could?

Strict fiscal policy is not at odds with growth but a prerequisite for growth.

But maybe not at the speed with which the program was implemented.

If anything, the latest economic figures show that it was the right way to go. I will say it again: Unemployment in Greece is not a result of European policy. That is an illusion. And don't listen to those who say that there is an easier way.

How may years do you think it will take us before we can reach acceptable numbers?

I believe that Greece will achieve its targets this year and there will be economic growth once more. This in turn will create new jobs. In modern economies jobs are not generated by huge investments but by small and medium-sized businesses.

You are here and we have heard that Chancellor Angela Merkel is due to visit Athens. Is this an expression of pre-election support for the government for Berlin? Are you concerned about the outcome of the European elections?

I am not afraid of elections. I'm a democrat. Chancellor Merkel was here last year as well, as was I. Anyway, I am here because Greece holds the [EU] Presidency. Of course we want our visits to show that we support Greece on its path, irrespective of the elections. We did it last year, we're doing it this year and we'll do it next year as well.

In your domestic politics, are you worried about the Alternative for Germany party?

As I said, I am not worried about election contests. We are determined to keep the said party at the lowest possible level.

And how will you achieve that?

Through persuasion. If we fail to persuade the majority of the people of the correctness of our policy, then we have no clear mandate. That is the essence of democracy. And democracy was born in Athens.
 

ekathimerini.com , Sunday April 6, 2014 (13:23)  
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