After the new Greek government fought valiantly a la David vs Goliath for several weeks, only to cave in the last minute and admit that the best it can do is continue the much hated policies of the predecessor Samaras government by extending the Greek bailout program, it now has a bigger problem: assuring its European "partners" that, having flipflopped, it is as trustworthy as the Samaras government. And none other than the German FinMin Wolfgang Schaeuble made that point early on Wednesday when in a radio interview with SWR2 radio, he said that it had not been an easy decision for euro zone finance ministers to extend the Greek rescue plan by four months and "much doubt remained about how credible Athens' latest reform commitments really were."
Reuters quotes Schauble who said that: "It wasn't easy an easy decision for us but neither was it easy for the Greek government because (they) had told the people something completely different in the campaign and afterwards."
"The question now is whether one can believe the Greek government's assurances or not. There's a lot of doubt in Germany, that has to be understood," said Schaeuble who despite his misgivings, he has urged German lawmakers to approve the Greek extension in a vote in parliament expected on Friday.
The finance minister made one thing very clear: No payments will be made to Athens unless Greek govt meets its commitments in full.
In other words, Greece may have bought itself a 4 month bailout extension on paper, but in practice unless it succeeds in boosting its tax collections in the coming days, its state coffers - already on the verge of being completely empty - will run out of cash, and Greece will then really have no choice but to declare full insolvency. The only question is how much longer will the Troika continue its "pass-thru" funding operations, where it gives Greece aid so that Greece can paid interest and maturities on Troika debt?
Something tells us that if the government runs out of all cash to pay government workers, it is all over anyway.
And then there is the issue of whether the proposed Greek bailout extension will even pass a Bundestag vote: according to Rheinische Post, up to 60 government members will vote against the Greek bailout on Friday when the vote on the extension is due, following reports that Greece now expects a third bailout in the summer amounting to at least €20 billion.
Full Schauble interview below.