WASHINGTON (AP) — Germany's finance minister said Friday that a second massive bailout package for Greece may have to be re-evaluated after the country's debt inspectors discovered problems in implementing previous promises.
"I would be surprised if the preconditions for the payment of the next (aid) installment in September had changed, but not the preconditions for an additional program for Greece," Wolfgang Schaeuble said in a news conference in Washington after a meeting with his counterparts from the Group of 20 industrialized and developing nations.
Greece's international debt inspectors early this month interrupted a review mission in Athens amid disagreement over whether the debt-ridden country was cutting its budget deficits as promised in return for a first rescue package. They are set to return next week, after Greece announced a raft of new austerity measures.
Eurozone leaders in July agreed in principle to give Greece a further €109 billion in rescue loans, on top of €110 billion granted last year, to keep the country from defaulting on its massive debts; default would rock European banks and could push large parts of the world into a second recession.
Already at the time, officials said that the €109 billion figure was an estimate that possibly would have to be adapted after Greece's debt inspectors — officials from the European Commission, the European Central Bank and the International Monetary Fund — had taken a more detailed look at the country's financing needs. Another variable in the package is the contribution of banks and other private investors, which are being asked to give Greece easier terms on its bonds.
But Schaeuble's comments are the most vocal acknowledgment to date that the second aid package may face a deeper review as Greece risks slipping ever further behind the targets set out in its bailout program. They also are another example of how the eurozone has struggled to get ahead of its debt crisis, repeatedly having to re-evaluate recently announced measures as the situation worsened.
The Greek government has warned that the country's economy is expected to shrink some 5.3 percent this year, far worse than was estimated even this summer. But apart from a worsened recession, Athens has come under fire for not implementing promised economic reforms in time and not selling off state property as quickly as agreed.
To get eurozone leaders to commit even more money to Greece, a country whose debts are approaching 160 percent of economic output, Athens had to adopt in June a €28 billion austerity package as well as €50 billion in privatizations, facing down an increasingly reluctant parliament and violent protests across the country.
Already, three months after those new measures were passed, Greece has had to take corrective steps, announcing a new property tax earlier this month and speeding up pension and public sector cuts.
Getting private investors to commit to easier lending terms also has taken more time than initially expected, with some analysts questioning whether Greece can get the required 90 percent of them to swap their existing bonds for new ones that have a lower face value, pay lower interest or have longer repayment deadlines.
A European official said that changes to the Greek package may also entail different terms for the participation of private investors. The official was speaking on condition of anonymity because of the sensitivity of the issue.
"The implicit contract between Greece and the rest of the euro area — official support in exchange for a good-faith effort — is breaking down," David Mackie, an analyst at J.P. Morgan in London, wrote in a note. "Greece is failing to deliver on structural reforms amid continuing slippage in fiscal outturns, while attitudes among official creditors are hardening."
Mackie warned that that a re-evaluation of the second bailout program could entail steeper losses for banks and other private creditors. "A second much harder debt restructuring now seems inevitable," he wrote. "This will produce worse macroeconomic outcomes for both Greece and the rest of the region."
Schaeuble signaled that further changes to the eurozone's bailout fund may also be in the works. French Finance Minister Francois Baroin late Thursday said that his counterparts were considering allowing the so-called European Financial Stability Facility to tap central bank loans to boost its firepower.
When asked about the idea of leveraging the EFSF — the technical term for schemes that would allow the fund to benefit from central bank liquidity — Schaeuble said first all eurozone countries had to implement a previously agreed overhaul.
He did not rule out the concept of leveraging, however, an apparent turnaround from Germany's insistence until now that the €440 billion EFSF was big enough.
"If you are already thinking about the step after the next step, the danger that you will stumble on the next step increases accordingly," Schaeuble told journalists.
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