New austerity a precondition for Greek aid: Germany

Finance Minister of Greece George Papaconstantinou (L) arrives to meet with U.S. Treasury Secretary Timothy Geithner (not pictured) at the International Monetary Fund/World Bank Spring Meetings at IMF headquarters in Washington, April 24, 2010. REUTERS/Jonathan Ernst

BERLIN (Reuters) - Greece must agree to tough new austerity measures before it receives any financial aid from the European Union and failure to do so would endanger such support, German Finance Minister Wolfgang Schaeuble told a newspaper.

“The fact that neither the EU nor the German government have taken a decision (on providing aid) means that the response can be positive as well as negative,” Schaeuble told the Sunday edition of Bild.

“This depends entirely on whether Greece continues in the coming years with the strict savings course it has launched. I have made this clear to the Greek finance minister.”

Greece bowed to pressure from financial markets on Friday, making a formal request for the activation of a joint aid package from the EU and International Monetary Fund (IMF) that is valued at up to 45 billion euros ($60.49 billion).

The debt-saddled euro zone member has already announced billions of euros in austerity measures, including tax hikes and public sector wage cuts, but is talking with the EU and IMF about additional steps.

Opposition to aid for Greece runs deep in Germany and Chancellor Angela Merkel, who faces a crucial regional election on May 9, has been at pains to stress that aid will only flow if Athens takes further steps to cut a budget deficit which soared to 13.6 percent of gross domestic product (GDP) last year.

Schaeuble said a “tough restructuring program” for the next years was “unavoidable and an absolute prerequisite” if Germany and the EU were to approve the aid Greece has requested.

But he also made clear that Germany had to be ready to support Greece to ensure the stability of the common currency.

“We are defending the stability of the euro, because Germany benefits (from the currency) at least as much as all the others. Help for Greece is therefore not a waste of taxpayer money, but a move based on fundamental German interests.

Writing by Noah Barkin; Editing by Angus MacSwan