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Tags: Merkel | Greece | Bailout | Terms

German Lawmakers: Merkel Mulls Easing Greece Bailout Terms

Friday, 17 August 2012 09:01 AM EDT

Chancellor Angela Merkel is considering easing Greece’s bailout terms, fanning tensions with members of her coalition who oppose giving the Greek government any more concessions, two German lawmakers said.

Merkel’s government is torn between showing some leniency toward Greece as it struggles to meet the terms of its rescues and insisting that Prime Minister Antonis Samaras delivers on his promises, Klaus-Peter Willsch and Frank Schaeffler, both of whom have voted against Merkel’s euro crisis policies in parliament, said in separate telephone interviews.

“The sensitivities among many more than just the 27 coalition members who voted ‘no’ last time are well known” to Merkel, “so the official line is to stay tough” on Greece, said Willsch, a member of Merkel’s Christian Democratic Union party. “But at the same time, some are being sent forward to test the waters on how this tough line can be abandoned.”

Samaras, whose coalition favors extending its fiscal adjustment program by two years to the end of 2016, will visit Berlin on Aug. 24 for talks with Merkel almost three years after the debt crisis emerged in Greece. The country’s international creditors are due to report on Greek progress in meeting bailout targets next month, an assessment that will determine whether Greece receives a next aid payment needed to stay in the euro.

Samaras Compromise

While it’s too early to rule out that an example will be made of Greece if it fails to adhere to the program terms, Merkel will probably seek a compromise with Samaras that would allow both sides to save face, Schaeffler, a Free Democratic Party lawmaker said in a telephone interview. The example offered by Spain shows that bailout terms are flexible, he said.

“We’re seeing the softening already in the case of Spain, which was given a ‘bailout deluxe’ rather than a fully-fledged program,” Schaeffler said. “And since Spain will need more money, that program will also be softer than that of the others,” possibly triggering re-negotiation demands in Ireland and Portugal.

While neither Willsch nor Schaeffler mentioned any specific proposals being considered by the chancellery, Norbert Barthle, CDU budget spokesman in parliament, said in a July 25 interview that Greece may need a second debt restructuring to stay in the 17-nation euro region.

Conflicting Signals

German officials have sent conflicting signals on Greece in the past month as the so-called troika of the European Central Bank, the European Commission and the International Monetary Fund assesses Greek progress.

“If the troika says the situation there is not in order, then there can be no money,” Michael Fuchs, a deputy CDU parliamentary leader, told reporters in Berlin. “Greece must stick to its agreements. It’s as simple as that.”

That contrasts with Michael Meister, another CDU deputy leader, who said in an Aug. 7 interview that Germany has “a certain flexibility” toward Greece. Foreign Minister Guido Westerwelle, of Merkel’s FDP coalition partner, told this week’s Spiegel magazine that time lost during two election campaigns in Greece must be taken into account in any easing of rescue terms.

“Everything can be put on the table,” Steffen Seibert, chief German government spokesman, told reporters on Aug. 15, referring to Merkel’s meeting with Samaras next week. All agree that a third Greek bailout would have trouble gaining approval the lower house, or Bundestag.

Maintain Pressure

While Merkel has pledged to do everything to protect the euro, easing Greece’s bailout terms would make it difficult for Germany to maintain pressure on countries to carry out the reforms Germany sees as necessary, Willsch and Schaeffler said.

Both lawmakers have consistently refused to back Merkel’s line on the euro crisis. They voted against the temporary euro- area rescue fund, its permanent replacement and Greece’s second bailout in separate votes in the Bundestag.

“As long as the government isn’t ready to question the composition of the eurozone, there is no other choice” than to save Greece, said Willsch. “That, at the same time, is the source of the failure of these rescue policies. If you impose conditions, monitor them, realize they’ve been violated and shy away from drawing the consequences, you have a blunt sword.”

© Copyright 2024 Bloomberg News. All rights reserved.

Friday, 17 August 2012 09:01 AM
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