Merkel : No German guarantee for Greece

Chancellor Angela Merkel implicitly rejected yesterday news reports that Germany is to save Greece from a default, saying the assurance was only that there would be no “uncontrolled processes”. Last week, German finance minister Wolfgang Schaeuble had said at a news conference in Singapore than he did not expect a default. German public television suggested on Sunday that newspaper reports construing this as a guarantee were wrong, since he had been speaking in English, a language in which he does not express himself well. “I think ... It will not happen that there will be a Staatsbankrott in Greece,” Schaueuble said at the Chamber of commerce in Singapore. The German word Staatsbankrott means default by a state on its debts. Asked if this amounted to a guarantee, Merkel said: “There are great fears on other continents, in Asia ... that there will be uncontrolled processes in the eurozone. “On this, the German finance minister said — and I see it exactly as he does — that there will not be any uncontrolled processes,” she continued. “That does not of course subtract from the fact that we are still waiting for the troika report and that we will draw our conclusions then. “It is about bolstering confidence in our options.” The troika — made up of the International Monetary Fund, the European Central Bank and the European Commission — is drawing up a report on Greece’s progress in cutting fiscal deficits. Schaeuble and Merkel have regularly said that Germany is waiting for the report from the country’s international creditors before paying out the next installment of bailout aid. Merkel added during a news conference at her office that everything being done was to “avoid the world economy entering a state of shock.” “We want Greece to remain in the eurozone, but the work has not been finished, and there is a whole lot to do in the next weeks,” she said. Athens is trying to persuade the troika that it is doing all it can to slash costs by €13.5bn ($17.5bn) by the end of 2014, with a €31.5bn instalment from its bailout packages riding on that. Merkel told Greek prime minister Antonis Samaras during a visit to Athens last week marred by violent protests that the “tough path” of painful spending cuts Germany has advocated will pay off. Greece’s deputy finance minister, meanwhile, yesterday said that international creditors had underestimated the impact of three years of austerity on the country’s deep recession by using a faulty calculation. Christos Staikouras said the actual fiscal multiplier, or negative effect, of austerity on growth is “around 1, not 0.5,” the number used by the troika to draft their fiscal policy recommendations. As a result, the €49bn ($64bn) in cuts imposed by successive Greek governments since 2010 have failed to provide their forecast fiscal results, Staikouras said.