Greece heads for third rescue

Germany's finance minister Wolfgang Schäuble let the cat out of the bag by revealing Greece was in need of yet another bail-out.

Germany's finance minister Wolfgang Schuble confirmed this week that Greece would need a third aid package in order to get on top of its towering debt load. Over the past three years, Greece has received €246bn of loans. Its economy has shrunk by a quarter in the past five years and its debt pile is expected to peak at 180% of GDP this year. Schuble's comment raised eyebrows as European policymakers had always hoped to avoid a politically contentious new aid programme, and were keeping very quiet in the run-up to German federal elections in September.

What the commentators said

Baywatch

This has looked inevitable for some time, as Wirtschaftswoche points out. Greece has been burning through its recue loans so fast that the €14bn remaining are hardly likely to last until the end of 2014. European policymakers have been far too optimistic in their estimates of everything, from GDP to privatisation revenues. Officials pencilled in €4.5bn of the latter for 2013 and 2014, but this is "utterly illusory". Indeed, the original target was €50bn by 2016; now it's €15bn. Progress on clamping down on tax evasion has also been slow.

Meanwhile, austerity measures have deepened the recession, added Capital Economics, while banks are still "unable or unwilling to lend" despite having been recapitalised. So the current forecasts for a return to growth next year look unrealistic and the debt pile is set to grow even higher. Add all this up, and it's clear that we are heading for "another major debt restructuring". The next chapter in the euro crisis saga is about to begin.

Recommended

What next for Haiti after its president was assassinated?
Global Economy

What next for Haiti after its president was assassinated?

Haiti, the poorest country in the Americas, has had more than its share of turmoil over the years. Its latest president was assassinated in July. Is a…
31 Jul 2021
The charts that matter: bitcoin rises and a mixed week for tech
Economy

The charts that matter: bitcoin rises and a mixed week for tech

Tech stocks suffered a volatile week. Here’s how it affected the charts that matter most to the global economy.
30 Jul 2021
The crisis brewing in emerging markets
Emerging markets

The crisis brewing in emerging markets

Covid-related political unrest and financial collapse in the developing world are the biggest threats right now, says Matthew Lynn.
25 Jul 2021
The charts that matter: what happened to reflation?
Economy

The charts that matter: what happened to reflation?

Government bond yields turned down this week, while the US stock market hit new highs, as “reflation” trades wilted under the pressure of concerns ove…
24 Jul 2021

Most Popular

Why the UK's 2.5% inflation is a big deal
Inflation

Why the UK's 2.5% inflation is a big deal

After years of inflation being a financial-assets problem, it is now an “ordinary things” problem too, says Merryn Somerset Webb. But central banks st…
16 Jul 2021
The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism
Economy

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism

Russell Napier talks to Merryn about financial repression – or "stealing money from old people slowly" – plus how Asian capitalism is taking over in t…
16 Jul 2021
Cryptocurrency roundup: Twitter founder’s “DeFi” platform
Bitcoin & crypto

Cryptocurrency roundup: Twitter founder’s “DeFi” platform

In crypto this week: regulators are getting worried; Jack Dorsey’s bitcoin DeFi platform; and dogecoin’s co-founder lambasts cryptocurrencies.  Salon…
16 Jul 2021