Daniel Ritort

A third Greek bailout may be needed

Lucas Papademos at Parliament of Greece

Lucas Papademos at Parliament of Greece

Greece has received the biggest bailout in history but another lifeline could not be ruled out.

Lucas Papademos, Prime Minister of Greece, stated that Greece could require a third bailout.

Papademos said that some financial assistance might be necessary but Greek government has to work intensely to avoid such an event.

He also argued that Greece may require a third bailout due to a deeper than expected crisis. His statement came only few weeks after Greece secured a second package of rescue funds following months of hard-wringing in the European Union.

The European Union and International Monetary Fund have committed a total of 240,000 million Euros to Greece in a bid to avoid its bankruptcy and subsequent euro exit.

Papademos is currently working on further spending cuts. He told to Greek parliament today that whatever government emerged after forthcoming general elections it is vital that it prepared for the measures.

In his opinion, in 2013-2014, a reduction in state spending of about 12,000 million Euros is required under the new economic programme. He added that every effort must be made to limit wasteful spending and not to further burden salaries of civil servants.

Greek official sources said the prospect of further aid would be given if Greece is unable to service its debt by borrowing on international markets. Greece has been locked out of markets since first seeking international aid in May 2010.

Papademos stressed that a third bailout would be dealt if Greece enforced all the reforms being demanded by its troika of creditors at the European Union, European Central Bank and International Monetary Fund, it remained far from certain that it would be able to access capital markets by 2015, when the country’s latest financial support program ends.

He argued it is difficult to foresee market conditions and expectations in 2015.

Papademos said to Greek parliament that after latest write-down of Greek debt, the Greek economy would begin to rebound in 2013.

The bond swap has sliced around 95,000 million Euros from the country’s 360,000 million debt with an additional 12,000 million expected to be erased when, completing the restructuring, coupons governed by foreign law are exchanged next week.

Insiders said the new government emerged after general elections will ave about 60 days to enact long-overdue structural reforms and agree on ways of reining in public debt before troika officials make a crucial inspection tour of Greece next June.

Papademos aide stressed it is very important that there would not be let up in the pace of reforms after elections.

Earlier this week, the chiefs of both the European Union and International Monetary Fund missions to Greece said while progress had been made meeting deficit-reducing targets, much remained to be done.

Matthias Mors, head of European Union monitor, stated there are still many measures to be taken, painful ones too. And added they will be able to see in the second half of 2012 in which direction Greece is going, whether it is on the right path or not.

Poul Thomsen, supervisor at International Monetary Fund to Greece, was tougher still and predicted that economic recovery for the debt stricken country would take at least a decade.

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