June 9, 2011
The troika of the European Commission, European Central Bank and IMF has prepared a sobering report on Greece's efforts to combat a debt crisis. The document, which has been obtained by SPIEGEL ONLINE, concludes that Athens will not be able to return to capital markets in 2012 and further massive bailout will be needed soon.
It may be just nine pages long, but the report by the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) packs a punch. According to the keenly awaited report, which has been obtained by SPIEGEL ONLINE, it is unlikely that Greece will be able to return to borrowing money on the capital markets in 2012 as previously foreseen -- meaning European taxpayers will probably have to prop up Greece with billions in payments for much longer than was originally planned.
The troika's prognosis is bleak. Although there is some evidence that "the rebalancing of the economy is ongoing and the quarter of deepest contraction (has) already been passed," the report warns that "a further contraction in real GDP is still expected in the second half of 2011." The real GDP growth rate for 2011 is now protected to be minus 3.8 percent, the authors conclude, adding that positive growth rates are not expected before 2012. Even then, they will only be "moderate."
The current negative outlook presents the troika with a major challenge. The IMF's statutes stipulate that the organization can only lend a country money if it is certain that the state will be able to meet its payment obligations for the next 12 months.
The new report has now made it clear that Greece is not in a position to guarantee that, meaning that the IMF cannot transfer any more money while there is still a chance of Greece defaulting within the coming 12 months. "Given the remoteness of Greece returning to funding markets in 2012, the adjustment program is now underfinanced. The next disbursement cannot take place before this underfinancing is resolved," the report concludes.
This in turn means that Europe will have to come up with a new rescue package. German Finance Minister Wolfgang Schäuble estimates that Greece will need €90 billion ($132 billion) to cover its funding needs between 2012 and 2014, according to government sources quoted by the news agency DPA on Wednesday evening. Luxembourg Prime Minister Jean-Claude Juncker, who is head of the Euro Group, has also mentioned the same figure. On Wednesday, following a telephone conference of euro-zone finance ministers, Juncker said that Athens' privatization plans should bring in €30 billion, covering one-third of the needed funds.
But a new bailout for Greece could be a tough sell for the euro-zone member states, which will have to get their national parliaments to approve a new package. The German government will find that especially difficult, given domestic resistance to providing Athens with more funds.
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