European Union Economic and Monetary Affairs Commissioner Olli Rehn said it’s too early to judge how much extra money Greece will need to plug an emerging hole in its 240 billion-euro ($321 billion) rescue program.
Rehn said the so-called troika representing creditors needs to pore over Greece’s accounts before determining whether the figure of 10 billion euros cited last week by Finance Minister Yannis Stournaras is accurate.
“It is premature to quote any figure,” Rehn said in an interview in Brussels Wednesday. “The troika will do its job and make the analysis of the potential financing gap and we in the normal order of things will make possibly a proposal in the course of this autumn.”
Greece’s widening needs have intruded on the election campaign in Germany, the country that has dominated the management of Europe’s 3 1/2-year-old debt crisis. Chancellor Angela Merkel is running on the promise that loans made to Greece won’t be written off.
The release of 5.8 billion euros in July and August put off the next reckoning with Greece until after the Sept. 22 election, which will be German voters’ first opportunity to pass judgment on Merkel’s handling of the crisis.
To counter opposition charges of covering up the cost to the German taxpayer, Merkel’s government has prepared voters for some additional concessions to Greece. Finance Minister Wolfgang Schaeuble last week spoke of a follow-up package that is “much lower” than previous ones.
Europe faces two deadlines on Greece. By the end of the year, there needs to be a decision on plugging the financing gap for 2014, estimated at 4.4 billion euros by the International Monetary Fund in July. Creditors need to fill that hole first because the IMF insists on seeing a 12-month guarantee of Greece’s financing in order to continue with its own lending.
The second deadline, sometime next year, is to consider possible “further measures and assistance” promised by European creditors in November 2012. These hinge on Greece posting an operating budget surplus before interest payments this year, a figure that won’t be certified until April 2014.
Speaking as the European Commission got back to work after the summer break, Rehn said the size of any additional package would hinge on Greece’s needs and — a decisive factor for the IMF — its ability to repay.
“It’s important that we indeed first do the analysis and focus on both the question of whether there is a financing gap and second on debt sustainability,” Rehn said.
Asked about the power struggle in Italy between Prime Minister Enrico Letta and allies of former leader Silvio Berlusconi, Rehn said that an easing of political tensions is the first ingredient for an economic recovery.
“We all know that there have been political challenges in Italy and I trust that the political leaders try to ensure political stability,” he said. “It’s important for economic stability and recovery.” [Bloomberg]