Schaeuble Admits Greece Will Need Another Bailout

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In the biggest non-news of the day, Germany's Finance Minister Wolfy Schaeuble finally admitted, officially for the first time, what everyone knows: Greece will need a third bailout. His exact words, as cited by Reuters, "There will have to be another programme in Greece," Wolfgang Schaeuble told a campaign audience in northern Germany, in comments that raised prospect of a step that could be deeply unpopular domestically just five weeks before national elections.

Which poses the question: why admit this before the German election in a few weeks: if anything this hurts Merkel's reelection chances. And not even a Greek source chiming in and promising that the third bailout will be smaller than previous ones, will do much to assuage Germany fury that Greece has become the infinite money hole (that everyone with half a brain predicted it would in May 2010) and that over three years after the first bailout, and the unofficial bankruptcy which saw bondholders getting pennies on the dollar, the country is still not "fixed." If anything this may change the election dynamic and outcome substantially.

More from Reuters:

In Frankfurt, the European Central Bank said Executive Board member Joerg Asmussen would visit Greece on Wednesday to discuss progress on reforms needed to ensure more bailout money.

 

Schaeuble's comments go beyond any utterances from Chancellor Angela Merkel, tipped to win a third term in the Sept. 22 election, who has taken a more cautious line on Greece to avoid angering voters who fear they will have to foot the bill for Athens.

 

Schaeuble has said in the past that international lenders may have to consider a new aid programme for Greece after the existing one runs out at the end of 2014, but he has never described this as inevitable, as he appeared to do on Tuesday.

...

Earlier this month, the German government, one of Greece's biggest creditors, dismissed a report by Der Spiegel magazine, which quoted a document that said Europe "will certainly agree a new aid programme for Greece" and that the existing aid package carried "extremely high" risks.

 

Merkel, whose soaring popularity is due in part to the hard line she has taken during the euro zone crisis and her focus on austerity, again tried to quash speculation about Greece in an interview with the Ruhr Nachrichten newspaper on Tuesday.

 

"No, I don't expect a new haircut for Greece. We are moving ahead step for step. There is no question that a lot has to change in Greece. But we also see clear progress and recognize this," she was quoted as saying.

So, a coupld of European bureaucrats... lied? Unpossible. At least the EURUSD is up on the news.