Just when flash Eurostat estimates suggested that the European economy was gradually on the way to recovery, giving the Brussels panjandrums time to enjoy their summer break, Greece bounced back on the European agenda with a vengeance.
Greece’s troubles are far from over and the fresh debate going on in Europe over its debt burden is a prelude to the new aid the country is expected to ask for in order to continue riding its financial storm. Malta has a direct interest in what happens in Greece because, like the rest of the eurozone members, it is a participant in the bailout programme, contributing its share to the amount.
Proportionately, Malta’s commitment was the largest in the EU. It ended up lending Greece €50.6 million and, while the island was originally expected to make a profit from this, it transpired some time ago that the country will actually be making a loss. Therefore, the Greek story is of more than a passing interest to us.
The new debate was sparked off early in August by the German Finance Minister, Wolfgang Schaeuble, who said at an election campaign event that Greece will need another bailout to plug a forthcoming funding gap. With Germany heading towards an election on September 22, the remark triggered a furore as many Germans feel their country has contributed more than enough to the Greek economy.
The Dutch Finance Minister, too, thinks that Greece may yet need another bailout. Jeroen Dijsselbloem said: “The problems in Greece won’t be solved in 2014, so something more will have to happen.”
According to the International Monetary Fund, there is a €11 billion shortfall in the current rescue package. What does Greece say? Greek Finance Minister Yannis Stournaras first said that if Greece were to need a new bailout next year, it would be a much smaller package of about €10 billion with no austerity conditions attached.
Greece has had two aid programmes so far, one of €110 billion in May 2010 and the second, of €140 billion, in February 2012. Only a day after the Greek Finance Minister commented on the size of a possible third package, he was quoted saying that Greece may seek to ease its debt burden by renegotiating its bailout terms. This could involve lower interest payments and more time to repay. So, he felt it may not be necessary to seek a third bailout after all.
The Greek Finance Minister told Reuters a few weeks ago that Athens hoped to cover part of the gap by returning to the bond market, which it can easily do as early as 2014 with a “small size” bond issue.
The story has therefore yet to evolve further and it remains to be seen how the new arrangement, whatever form it eventually takes, will affect Malta.
When the issue was raised in Parliament in June, Finance Minister Edward Scicluna, explained that Malta’s commitments, made up of loans and guarantees, amounted to three per cent of economic output (GDP).
Scenes of street protests in Athens over austerity measures highlight the plight of people who are experiencing a drop in their standard of living. Their anger is understandable but part of the blame surely ought to be shouldered by the Greek people themselves. For example, billions of euros are lost to tax evasion annually.
The curtain has yet to fall on the Greek drama.