Wolfgang Schaeuble: third Greek package will be 'much smaller'

Wolfgang Schaeuble has repeated his warning that Greece will need a third bail-out, but said that any fresh rescue would not involve a second debt writedown that could "destabilise" the whole of the eurozone.

Wolfgang Schaeuble has repeated his warning that Greece will need a third bail-out, but said that any fresh rescue would be much smaller than the country's two previous aid packages.
Germany's finance minister remained unrepentant about the impact of his comments, which made waves earlier this week when he told a campaign event that Athens would need another rescue after 2014. Credit: Photo: AP

The German finance minister was unrepentant about the impact of his comments, which made waves earlier this week when he told a campaign event that Athens would need another rescue after 2014.

"I'm happy that the broad public is aware of what I've been saying for a long time, that we'll have to look next year at further measures for Greece," he told German newspaper Handelsblatt.

"I don't want to be accused, after the election, of not having said the truth before the election."

Mr Schaeuble's remarks come a month before Germany's general election, where the issue of Greece's €240bn (£205bn) bail-out has divided voters as Germany is Greece's biggest creditor.

However, Mr Schaeuble insisted that any third rescue will be much smaller than the two preceding programmes.

"We have held out the prospect of further aid, on condition that the government in Athens meet its agreed commitments and on the expectation the sums involved will be much smaller than before," he said.

Mr Schaeuble also ruled out a second debt restructuring - or "haircut", that would involve creditors taking a writedown on their holdings of Greek debt. He said such a move could "destabilise" the whole eurozone.

"This debate is not only out completely irrelevant, it is also extremely dangerous," he said.

Although Britain is not part of the eurozone, and would not be expected to contribute directly to another Greek bail-out, it is liable for 4.5pc of funding to the International Monetary Fund (IMF). The UK has already pledged €1.3bn towards the IMF's €28bn rescue package for Greece.

Mr Schaeuble also said on Friday that he expected the European Central Bank (ECB) to raise interest rates once the economy improves.

"Low rates are above all an expression of insecurity on debt markets. That cannot last forever - even if it is a relief to the federal budget," he said.

"The central bank has announced it will raise rates again when the economy improves. That is good."

ECB rate-setter Ewald Nowotny said on Friday that he did not think it was right for the central bank to cut interest rates at the moment.

"From my personal point of view, I would not see many arguments now for a rate cut. I think what has proved to be a positive strategy is to have this steady hand approach," he told Bloomberg.

Earlier this month, Mario Draghi, ECB president, said that rates would remain low for an "extended period of time".