Greek debt interest deferrals would amount to €120bn over 23 years, the German finance ministry has calculated. Wolfgang Schaeuble can only say NEIN. The Greek government can keep struggling to persuade its creditors for ease of repayment terms. In vain.
In an internal paper obtained by German economic news daily Handelsblatt, Schaeuble takes a hard line on Greek interest deferrals.
“These are new calculations,” Handeslblatt notes adding that the new calculations from the German finance ministry has reinforced German opposition to any further debt reduction or interest deferral for Greece.
It is clear even to newborns, that target of this paper is the International Monetary Fund and less Greece itself.
“The IMF has calculated a primary surplus of only 1.5 percent of the gross domestic product (GDP) in its previous debt sustainability analysis to Greece, in the light of negative reforms.”
With its European lenders, Greece has agreed on 3.5% Primary surplus for the years after 2018. Another mission impossible.
One scenario with fewer reforms and lower primary surplus as well as other macroeconomic assumptions would “actually require a new, a fourth program of austerity measures to limit gross financing requirements to a sustainable level by the year 2060 (= long term maturity of European loans). Further deferral of the interest on the loans of the European creditors by the year 2040 and extension of repayment-free period for these loans would be necessary.”
Handelsblatt notes that Germany in fact wants some kind of debt relief measures after the current program expires in summer 2018 but not “so radical that would equal a new bailout package.”
The German ministry calculates that interest rates for Greece will increase reaching to up 3.3% by 2040 and “respectively Athens interest payments to creditors will be higher, as well.
Also Chancellor Angela Merkel seems to agree with Schaeuble on this. According to Handelsblatt, Merkel hinted to IMF’s Christine Lagarde that she may well imagine a further extension of the loan repayment period, but not a ceiling on interest rates.”
“Interest rate deferrals would in fact big new loans,” the German accountants of the ministry argue because “in order to refinance the funds the lenders will need to refinance themselves in the capital markets,” and Germany would need a parliamentary decision, anyway.
I wish I had time to check with my archives and other sources and see how much money each EU country and other institutions has given to Greece.
I remember an older report saying that Germany earned 300 million euros from Greece interest repayment in the first years of the bailouts. We never saw an update ever since, though.
So if Germany earned 300million euros in -let’s say- three years, it means it earns 100million per year from Greece.
According to the German ministry calculations, Berlin will need to borrow money form the markets to ‘refinance the loss? I have heard better jokes than this one.
The internal paper was also obtained by Die Welt.
PS If the German finance ministry has problems with calculations can turn to the IMF. It has greater experience with miscalculations.