GERMAN FINANCE minister Wolfgang Schäuble has warned that future financial assistance to Greece is dependent on a positive interim report from EU-IMF inspectors.
In a lively parliamentary debate yesterday, Mr Schäuble described as “misunderstood solidarity” calls to pool euro zone debt into eurobonds and said an “end to credit politics” was the only way to stabilise the euro zone.
“The troika mission has to be continued and come to a positive result, otherwise the next tranche cannot be paid out to Greece, that must be acknowledged in Greece,” he said. “That is binding, without any room for interpretation.”
Last year the EU and IMF granted Greece a €110 billion bailout followed by a second aid package for €109 billion agreed in July this year, with private creditor participation. Last week the troika suspended its mission to Athens amid a dispute with the government over reforms.
Yesterday in Berlin, the German finance minister ruled out introducing eurobonds without imposing tighter fiscal controls first. Removing an incentive for austerity measures would, he said, trigger a rapid ratings agency downgrade of common euro zone debt papers.
“The markets are not the problem, rather excess, that’s why we need rules and order,” said Mr Schäuble yesterday, presenting the draft 2012 budget to the Bundestag.
To cover next year’s budget deficit, Berlin plans to borrow €27 billion – down from a forecast €40 billion. The ministry predicts a balanced budget by 2014 – a year after the next general election.
The German finance minister said, despite promises by industrialised nations to halve their deficits by 2013, he “saw no industrialised nation besides Germany likely to fulfil this obligation”.
Mr Schäuble said he was still optimistic that the German economy would grow by 3 per cent this year, saying Germany was “not swimming in money, but not drowning in debt either”.
Berlin hopes to cut its deficit to 1.5 per cent of GDP this year, bringing borrowing under the EU’s 3 per cent deficit ceiling two years ahead of schedule.
Amid growing signs of an economic cool-off, opposition politicians attacked yesterday’s draft budget as a “fair weather prognosis budget”.
Germany’s federal economics ministry revealed yesterday that industrial orders dropped by 2.8 per cent compared with the previous month, while domestic orders rose 3.6 per cent.
Ahead of today’s constitutional court decision on euro zone bailouts, many government backbenchers have developed cold feet over expanding the European Financial Stability Facility bailout fund.
During a dry-run vote ahead of a September 29th Bundestag ballot, 14 government MPs voted against the proposed bill and 11 abstained. To secure a parliamentary majority from her own ranks, Chancellor Angela Merkel can afford only 19 dissenters on the government benches.
Dutch finance minister Jan Kees de Jager said no agreement was reached on Finland’s demands for collateral during talks with his Mr Schäuble and Finnish finance minister Jutta Urpilainen.
“Technical” issues remained to be resolved, Mr De Jager said in Berlin after the meeting. The matter of collateral, while “very important” to Finland, only formed a part of the discussion, he said.
“What’s holding up everything in the present situation is Greece and whether or not they are compliant in the current program,” Mr De Jager said. – (Additional reporting Bloomberg)
