Bad tidings

In Brussels, everybody is waiting for the new report by the troika of international lenders, consisting of the EU Commission, European Central Bank (ECB) and the International Monetary Fund (IMF). But for the time being the troika has taken a week's break, and once again the release date of the report has been postponed. A bad sign? According to the Commission, this interlude was not political. However, the German news magazine Spiegel says Greece now needs an additional 20 billion euros ($25 billion) - that’s twice as much as predicted. Moreover, the most recent Greek budget cuts of 11.5 billion euros have yet to be green-lighted - the three governing coalition parties have so far failed to reach consensus on a new round of austerity measures. International creditors are adamant that the second tranche of the bailout will only go ahead if Greece presses on with fiscal consolidation.

Public write-off ultimately hits the taxpayer

Greek Prime Minister Antonis Samaras has repeatedly called for a two-year extension of the repayment deadlines. He underlined in Berlin that he was not after more money. Nonetheless an extension would probably mean more money. According to Spiegel, Samaras now also wants the public creditors to waive some of Greece’s debts. Only this spring private creditors already waived demands to the tune of 100 billion euros. Back then the German government was keen to protect the interests of public creditors and ultimately the taxpayer. “A public write-off is out of the question,” said Martin Kotthaus, a spokesman for the German Finance Ministry.

The IMF may opt out

Markus Ferber, a conservative member of the European Parliament (MEP), also wants to wait until the new troika report is released.

"Further steps are not possible without declaring Greece’s insolvency. After all, the aim of all these bailout measures was to bring Greece back into the fold of financial markets and not to lock them out permanently."

But should additional funds be necessary, the IMF for one does not want to make any more contributions, the Greek IMF representative Thanos Catsambas told the Greek newspaper Kathimerini. According to Catsambas, the IMF has "exhausted all its possibilities." He called on the ECB - a public creditor - to write-off some of the debts, ultimately demanding the taxpayer foot this bill.

Unused leverage

In the meantime, however, the concept of "leverage" has returned to the debate of how to save the euro. In connection with the previous rescue mechanism, the EFSF, the discussion of how to increase the fund's leverage went on for almost a year.

This implied that the portion of the fund financed with public money was only to be used to cover the riskiest aspects of any rescue action; private investors, it followed, would then back the fund up with the rest of the needed capital in order to limit the risk.

An entire EU summit was dedicated to this issue. But alas, after everything was agreed by the politicians, there were no investors ready to join the scheme, and the leverage never really came to be.

Now, Spiegel has reported that the EU is at it again with visions of leverage for the new fund, the ESM. The news magazine says that the fund could now comprise a total of two trillion euros, four times what it was before at a mere 500 billion euros.

German reservations

Commission spokesman Olivier Bailly confirmed earlier this week that the EU is currently debating the issue. "We are in negotiations with member states on ways to use the financial instruments that were valid with the EFSF with the new ESM."

Martin Kotthaus, speaker for German finance ministry, meanwhile, dismissed any four-fold increase in the size of the ESM liability as "completely illusory." Whatever the case, the lower house of parliament in Berlin would have to vote in favor of any leverage mechanism, and the German contribution to the sum would have to remain the same, Kotthaus added.