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.