30 November 2012

German Bundestag approves Greek aid package

The German Bundestag has voted by a large majority to modify the existing programme for Greece, thus guaranteeing the further financing of aid for Greece. When the eurozone meets once again on 13 December, Finance Minister Wolfgang Schäuble can now approve the package.

In a government statement, the Federal Finance Minister explained the decisions taken by the Eurogroup on 26 November. He pointed out that it is no longer a question of only Greece, but of the future of the euro as a whole. "Nobody benefits more from Europe than we Germans, both economically and politically", he declared. "Without the euro our economic position would be dramatically weaker. When we work for a strong Europe, we are investing in our own future."

Delays lead to modifications to programme

Wolfgang Schäuble said that the elections in Greece had delayed the implementation of the programme. The overall economic situation has also deteriorated. "Greece will need another two years to meet its consolidation goals." This has made it necessary to modify the programme for Greece. "It is not a new third programme. The financial framework remains unchanged", stated Wolfgang Schäuble unequivocally.

The Eurogroup, the European Central Bank (ECB) and the International Monetary Fund (IMF) agreed on a package of measures on 26 November. The financing gap of €14 billion is to be closed by 2014, and Greece enabled to return to a point where its debt is once again sustainable.

The measures in detail

• Greece will be given two years longer (until 2016) to achieve the required primary surplus (which is not taken into account in interest calculated on national debt) of 4.5 per cent of gross domestic product (GDP). The difficult macro-economic environment and delays in realising the second aid programme have made necessary this change.
• By 2020 the level of debt is to be brought down to 124 per cent of the county’s GDP and by 2022 it is to be well below 110 per cent of GDP.
• To reduce the level of debt there are also plans to buy back Greek government bonds from private investors. They are currently being traded well below their face value.
• The eurozone states intend to give Greece the income of their national central banks generated from Greek government bonds held by the European Central Bank. This cash will be paid into a special account to be used by Greece to repay its debts. The euro-zone states will include this expenditure in their budgets as of 2013.
• The interest for loans already accorded under the first Greek aid package will be reduced by one percentage point. The refinancing costs for Germany are still covered. For the second aid package there will be deferred interest. Greece will not have to pay interest for the first ten years on loans accorded under the European Financial Stability Facility (EFSF).
• The terms of loans accorded under the European Financial Stability Facility programme and bilateral loans will by extended by 15 years.

Disbursement in four instalments

The loan of €43.7 billion from the second aid package is to be disbursed to Greece in four instalments: €34.4 billion in December and the remaining sum in individual payments by March 2013.

Assistance also tied to reforms

The precondition for disbursement of the next instalments is that Greece continue step by step to realise the agreed consolidation and reform agenda. "In all measures we have advocated the principle of conditionality", underlined Wolfgang Schäuble. "The disbursement of each instalment is conditional on the troika giving a green light. We must not provide any false incentives that would encourage Greece to let up in its reform efforts", he said, with a view to the debate on cancelling some of the country’s debt.

Like the German Bundestag, the national parliaments of all eurozone states must approve the package of measures.

Press release

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