SigmaLive — Wolfgang Schaeuble is once again expressing deep concerns over the Greek government’s commitment to implement the full bailout program in a timely fashion.
The third bailout for Greece, agreed between the SYRIZA-led government and the country’s international creditors on August 2015, will unlock up to 86 billion euros in financing over the next three years. In return, the Greek government has agreed to a series of highly unpopular and anti-growth measures, including sharp spending cuts and strict policy overhauls.
The new bailout agreement resolves Greece’s financing needs for the next three years but will clearly add further strains on the crippled Greek economy and will almost certainly increase the debt / GDP ratio, which today stands at the unsustainable proportion of nearly 180% .
In Europe, the average country carries a debt which of about 95% of GDP, while Germany’s debt at only 75%.
While Germany has insisted all along that any future financial support for Greece must include the IMF, Christine Lagarde has indicated that the decision on whether the IMF will participate in a third bailout for Greece won’t be made until the second quarter.
Progress on pension reform will be one of the key factors in making the decision; the other is that of debt sustainability.
Germany needs the IMF in the effort to provide financial support to bankrupt Greece not only because of the organization’s expertise in managing structural adjustment programs for indebted nations, but also because the IMF’s participation adds legitimacy to Germany’s pursued strategy in the Eurozone.
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