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Photo Gallery: Greeks Protest ahead of More Austerity

Foto: ARIS MESSINIS/ AFP

Greece on the Brink Athens May Need 10 Billion More

Greek parliament on Wednesday is considering yet more public sector cuts. But even that might not be enough, according to a German newspaper report. With German elections pending, though, any immediate additional relief is unlikely.

The Greek recovery may be facing yet another hurdle. According to a report by German daily Süddeutsche Zeitung, the beleaguered country needs another massive influx of money if it is to avoid insolvency. The paper cites an unnamed official at the European Commission as saying that the "financial gap" could be as large as €10 billion.

The news comes at a difficult time for Greece and its relations with Germany. German Finance Minister Wolfgang Schäuble is set to visit Athens this Thursday for consultations with his Greek counterpart Yannis Stournaras and with Prime Minister Antonis Samaras. Schäuble is highly unpopular in Greece for his consistent insistence on austerity. And with German elections looming in September, it seems unlikely that additional aid money for Athens will be forthcoming anytime soon.

That, though, could create further problems for Greece. The International Monetary Fund -- part of the troika of lenders keeping Athens afloat -- is only allowed to provide aid to countries whose finances are guaranteed 12 months into the future. Otherwise, it must withdraw funding. Should that happen, countries like Germany and Finland, who have made their own participation in the bailout contingent on IMF involvement, could withdraw as well.

Concerns that Greece could be in need of additional assistance are not new. France, for example, recently called for direct EU assistance for wobbly Greek banks. In addition, Greek Economy Minister Kostis Hatzidakis told German daily Die Welt earlier this month that he expects Europe to agree to another debt haircut  for the country, a conjecture with which he is not alone. Indeed, senior economists in Schäuble's own ministry told the daily Frankfurter Allgemeine Zeitung on Tuesday that a further reduction in the country's debt load is necessary.

"There will be a significant cut," Jörg Rocholl, president of the European School of Management and Technology and a member of an advisory council for the Finance Ministry, told the paper. "Greece's ability to shoulder its debts has not been guaranteed."

The anticipated funding shortfall is partly a function of Greece's economy remaining stuck in recession as well as the slow pace of the country's privatization program and other reforms.

More Protests on Wednesday

Indeed, when EU leaders approved the latest tranche of aid money for Greece earlier this month, they elected to spread it out over several months so as to increase the reform pressure on Greece.

The results of that pressure are coming to a head on Wednesday, with parliament set to address the slashing of thousands of public sector jobs by the end of this year. To protest the measure, labor unions on Tuesday staged their fourth general strike of the year, paralyzing the capital with peaceful marches. While it is widely expected that the Antonis government will be able to pass the measures demanded by the EU and the IMF, his margin for error is tiny. One party recently left his coalition in protest at ongoing austerity, leaving Antonis with just a three seat parliamentary majority.

And public employees will be doing their part on Wednesday to remind parliamentarians of their opposition to austerity. Athens is seeing further protests with mayors from around the country marching on parliament as municipal police officers staged a demonstration as well.

tmr -- with wire reports

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