Germany ready to back more aid for Greece

[May 12, 2011]  BERLIN (AP) -- Germany would back further support for Greece if the country continues to have problems refinancing its debt on the market, Finance Minister Wolfgang Schaeuble said Thursday.

The next progress report on Greece's current euro110 billion ($158 billion) bailout package, due in June, "will be closely watched" and will be key in deciding how to proceed, he told parliament.

Schaeuble insisted that any further aid must be tied to tough terms, arguing it is up to the Greeks to solve their underlying budgetary and structural problems. "We won't approve additional measures without clear conditions."

Germany is Europe's biggest economy and is a central, though sometimes reluctant, player in resolving the debt crisis.

EU officials have indicated more help will be needed to keep Greece from reneging on its debt accords beyond 2013, when the current bailout program expires.

The International Monetary Fund, the European Central Bank and the European Commission are currently evaluating Greece's progress to decide on whether to release the next round of funds under last year's bailout package that saved the country from bankruptcy. Their report is due next month.

"If it appears that Greece cannot return on the financial markets within the timeframe assumed last year, then we have to talk about what additional measures especially Greece can take, what can be done in addition to solve the problem," Schaueble said.

Greece's crisis follows years of inept governance, widespread corruption and waste that created bloated budget deficits and a public debt amounting to about 150 percent of economic output.

Despite drastic spending cuts already implemented -- with reductions to pensions and salaries accompanied by an increase in taxes and retirement ages -- investors still don't trust Greece to repay all its debts. As a result, its borrowing rates are prohibitively high, freezing it out of bond markets.

If that situation continues, Greece would need more help -- it is supposed to raise some euro27 billion ($39 billion) on capital markets next year, but that seems very unlikely.

Officials have not said publicly how much money Greece might need in addition to its first bailout, but hinted that the eurozone's 17 finance ministers are likely to make a broad announcement on potential new measures after their meeting in Brussels on Monday.

A top IMF official said Greece should be able to pay its debts with the help of reforms and the current bailout, but left the door open to changing that assessment after the review due in June.

"We have to decide as we go along whether we are still confident the Greek debt is sustainable or not and you can expect the fund, together with our European partners, to take a position on this in about a month's time," Antonio Borges, director of the IMF's European department, said at a news conference in Frankfurt.

Borges said Greece could privatize more assets beyond the current euro50 billion program as it has "an extraordinary portfolio of assets," with the government property management fund holding euro280 billion in real estate alone.

He estimated current plans included "less than 20 percent of all the assets that the Greeks could privatize."

But Greece's conservative opposition leader Antonis Samaras said the country should re-negotiate the terms of its bailout, arguing that the Socialist government had failed to achieve a good deal.

His proposals on how to pull Greece out of the crisis included rolling back recent tax hikes to help growth, reforming the notoriously complex tax system, cutting public waste and privatizations. He also proposed legalizing most illegally constructed houses and buildings, a process which he said would bring at least euro1.5 billion in to state coffers in the first year.

Greece badly needs economic growth to support its debt reduction drive. Official data released Thursday, however, showed its economic situation was worsening.

Unemployment rose to 15.9 percent in February, from 15.1 percent in January, according to the national statistical authority. In February last year, unemployment was at 12.1 percent.

The total number of unemployed was 787,229, while those with work numbered 4.17 million.

[Associated Press; By JUERGEN BAETZ]

Nicholas Paphitis and Elena Becatoros in Athens and David McHugh in Frankfurt contributed to this report.

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