If a third bailout is required for Greece to balance its books, it’s likely to be significantly smaller than the previous aid packages. The treasury in Athens has already received a total of €240bn from the trio of lenders, the International Monetary Fund (IMF), the European Central Bank and the European Union. But the IMF has estimated Greece will only require €11bn in 2014/15. Pocket change then eh.
Whether or not the bailout is definitely needed is still up for debate though. European Commissioner for Economic and Monetary Affairs, Olli Rehn, told a Finnish newspaper there were other ways to keep Greece’s aid programme alive – he suggested extending the repayment schedule on its existing loans.
Schaeuble’s comments won’t have been easy for him, as his party is facing an election in just five weeks. The continuing financial support of Greece by Germany is an unpopular move among taxpayers in the country, who feel their financial prudence is being taken advantage of.
Schaeuble may well face a showdown with party leader Angela Merkel, whose stance on Greece has been quite the opposite. She recently claimed it’s ‘too early’ to talk about new funding for Greece, probably keen to stay in favour with the country’s voters, in the run up to the election. Oh to be a fly on the wall at the Bundestag.
The news will put a real downer on the current positivity surrounding our economic recovery. Last week we celebrated the news the eurozone had emerged from recession, posting 0.3% growth following an 18-month contraction.
But it seems there are still tough times ahead for its most troubled state. Despite the positive readings for most eurozone countries, Greece posted a 4.6% contraction for the second quarter last week, only a slight improvement from the 5.6% contraction it experienced in the first.
Meanwhile, fears about the end of the US Federal Reserve's quantitative easing ‘gravy train’ have sparked further market downward spirals, as it gets ready for an interest rates meeting later today.
Emerging markets suffered, with India leading the way, as stocks plummeted and the rupee continued its downward trajectory. Brazil and Indonesia too suffered a sheer drops in their markets.
Closer to home, leading shares in the FTSE also took a tumble, as investors brace themselves for the news from the States. The FTSE Index went down 11.58 points to 6,441.88.