Germany approves Greek bailout, showing willingness to help Europe
By Michael Birnbaum,
BERLIN – Germany’s parliament overwhelmingly approved its country’s contribution to the Greek bailout on Monday, serving as a reminder that, for all of Germany’s caution about funding its poorer neighbors, Europe’s largest economy is still willing to muster billions to aid others.
The $174 billion rescue package was approved despite weeks of threats to let Greece default on its debt, with just 90 votes of dissent and five abstentions out of 591 members of parliament present for the vote. The vote in Germany — which guarantees about a quarter of Europe’s existing rescue fund — was seen as among the biggest tests for the bailout agreement, Greece’s second one in two years.
Coupled with France’s presidential election, where the pro-bailout Socialist Francois Hollande is leading polls over the more fiscally cautious Nicolas Sarkozy, the political dynamic suggests that both countries have more flexibility to help struggling European countries than they have acknowledged at the bargaining table.
Few leaders expect the agreement to deal a decisive blow to Greece’s economic troubles, and other countries, such as Portugal, might also need more aid. Sensing that Europe can do more to take care of its own problems, finance officials from the Group of 20 economic powers told European leaders this weekend that they must commit more of their own money before they receive more international aid.
Merkel told parliament before the vote that there was little choice but to give Greece the assistance, saying that the alternative — allowing Greece to default on March 20, when a major debt payment comes due — would be far worse.
“As chancellor of Germany, I should and sometimes must take risks, but I cannot embark on adventures,” she said. “Europe fails if the euro fails. Europe wins if the euro wins.”
That is a change from Germany’s hardball negotiating position in recent weeks, when finance ministry officials were considering whether it would be cheaper to take the fallout if Greece went bankrupt rather than contribute to Greece’s second rescue in two years.
Despite the tough words from Germany, simple math suggests that Merkel can push harder to get parliament to support the rest of Europe’s financially troubled nations, if she wants to. Two opposition parties that support the bailout, the Social Democrats and the Greens, control 35 percent of seats in parliament, and they favor policies that could put more of Germany’s money on the line, such as allowing individual countries to borrow money with the collective backing of the euro zone.
Add the deputies in Merkel’s governing coalition who are willing to do more to repair Europe’s economy, and there is a reliable pro-bailout majority in parliament, analysts say, even if dissent is growing in Merkel’s own ranks. The chancellor failed to win a simple majority of her own coalition on Monday, a sign that more of her allies are questioning Germany’s role in the deal.
Merkel’s coalition partners, the pro-business Free Democrats, are in principle more cautious about committing money to Greece. But in practice, their slumping public support means that if they broke their alliance with Merkel, they would be cast out of power. Merkel would almost certainly remain the head of any new alliance with other parties.
“It’s not that her hands are completely tied,” said Sebastian Dullien, a senior policy fellow at the European Council on Foreign Relations. “Provided that she’s willing to have a different coalition, then she has quite a bit of flexibility.”
Even deputies who oppose the bailout acknowledged that there was little political will to reject Merkel’s agreement and let Greece go bankrupt, despite a public that is deeply skeptical about additional aid for Greece. Opinion polls suggest that opposition to a bailout is growing.
In parliament, “not everybody supports it fully,” said Wolfgang Bosbach, a parliamentary leader of Merkel’s Christian Democratic Party, in an interview before he voted against the bailout. The approval is coming “despite the doubts,” he said. “In many cases, it will be a ‘Yes, but.’ ”
He said he doubted that the assistance will be enough to save Greece, because it leaves no clear path to reviving its economy.
“I often ask around who has bought a Greek product lately,” he said. “Nobody has, except for a fruit, maybe, or a bottle of Metaxa.”
But if Merkel’s strongest opponents have their say, Germany will become more generous, not less.
“We need a Marshall Plan for the crisis countries,” Sigmar Gabriel, the chairman of the opposition Social Democrats, told the Welt am Sonntag newspaper this week. Letting Greece go bankrupt “would be the beginning of the end for the E.U.,” he said, adding that he was concerned about Greece’s richest tax evaders as well as speculators seeking to profit from the country’s troubles.
Many Greek officials privately argue that their prospects hinge on staving off bankruptcy for now and hoping that the conversation in Europe moves from austerity and spending cuts to investment and growth.
Under the plan, Greece will receive the funds in exchange for taking harsh austerity measures. The nation will also write down 53.5 percent of the nominal face value of its privately held debt as a way to get its economy on track by 2020. The package directs the bailout money to be rolled into a special account and then passed out to Greece’s creditors, the cash shielded from the Greek government’s other financial needs.
Netherlands and Finland must also approve the rescue package, and European finance ministers will meet later this week to put final touches on the plan. A complicated bond exchange that will write off more than half of Greece’s privately-held debt must be completed within weeks as part of the package.
Special correspondent Petra Krischok contributed to this report.