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Germany's Schaeuble says Greece will need more aid

Chancellor Angela Merkel's government, which faces elections on September 22, has been at pains to avoid discussion of more financial aid for Greece, an unpopular notion with many voters.

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(Globalpost/GlobalPost)

German Finance Minister Wolfgang Schaeuble said Tuesday that crisis-hit Greece will need another rescue package after 2014, touching on a sensitive issue a month before elections in Europe's biggest economy.

"There will have to be another programme for Greece," Schaeuble said at an election campaign event near the northern city of Hamburg, the Frankfurter Allgemeine Zeitung and other media reported.

He added that "the public was always told so," but his comments were stronger than recent statements in which he only said a third aid package might be needed.

Schaeuble insisted that creditors would be not be forced to take more losses on their Greek holdings.

Indebted Greece, in its sixth year of recession, has been forced to cut jobs, pay and pensions in order to secure 240 billion euros ($322 billion) in rescue funds from the European Union and International Monetary Fund (IMF).

The "troika" of creditors -- the IMF, European Commission and European Central Bank -- will in September launch its next review of the Greek reform programme to determine whether Athens is eligible for the next instalment of aid funds.

The ECB said German board member Joerg Asmussen will visit Greece Wednesday ahead of the review.

Schaeuble told supporters of his conservative Christian Democratic Union (CDU) that Greece would need more international help to keep the interest that Athens pays on its debt from rising too much.

Chancellor Angela Merkel's government, which faces elections on September 22, has been at pains to avoid discussion of more financial aid for Greece, an unpopular notion with many voters.

On August 12 a finance ministry spokesman said there was no cause at the moment to consider fresh financial aid for Greece.

Merkel, quoted in the Ruhr Zeitung daily on Tuesday, said: "We have always said that we will have to reevaluate Greece's situation in late 2014 or early 2015. It is sensible to follow this timetable."

Germany's central bank however expects Greece to receive another bailout loan later this year or by early 2014, news weekly Der Spiegel reported earlier this month, citing an internal Bundesbank document.

The Bundesbank's experts also wrote they rated the risks of such an international loan programme as "exceptionally high" and the Greek government's performance so far as "barely satisfactory", the magazine said.

IMF chief Christine Lagarde in late July cited "commendable" progress Greece had achieved so far but also said that "greater reform efforts remain key to an economic recovery and lasting growth".

Merkel's Social Democratic rival Peer Steinbrueck challenged the chancellor to be truthful about the eurozone crisis and its cost for voters, not obscure it until after the election, in an interview with the Neue Osnabruecker Zeitung daily.

The centre-left candidate has argued that Europe, including Germany, must show more solidarity with crisis-hit members suffering under recession and high unemployment.

"I say very clearly that the rescue of Europe and the cohesion of the continent will carry a cost, including for us Germans," Steinbrueck said in the interview to be published Wednesday.

"It is time for Merkel to convey this clearly to the people."

Greens Party economics expert Priska Hinz said Schaeuble had broken a self-imposed taboo by conceding Greece will need more aid after 2014, saying this was a reality already acknowledged by IMF experts and the public.

"The government's obfuscation in the eurozone crisis is becoming less credible by the day," she said, predicting that after the election Schaeuble will also gradually concede that another debt cut will be necessary.

"Every other way would take too long and be too expensive," said Hinz in a statement. "But until the election, he (Schaeuble) will keep telling voters another fairytale."

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http://www.globalpost.com/dispatch/news/afp/130820/germanys-schaeuble-says-greece-will-need-more-aid