Greek bailout plan approved by German Parliament

World stocks were sliding Friday following Wall Street's plunge on Thursday and on continuing fears over the state of Greek finances and fresh worries over the U.K. election. European shares recovered slightly ahead of U.S. jobs data.
By Edward Cody
Washington Post Foreign Service
Friday, May 7, 2010; 12:07 PM

PARIS -- The German parliament gave overwhelming approval Friday to the unpopular financial rescue plan put together by the European Union and the International Monetary Fund to save Greece from bankruptcy.

The Bundestag, the lower house, voted 390 to 72 with 139 abstentions in favor of the loan package. Its approval was followed almost immediately by an endorsement in the Bundesrat, the upper house, completing legislative action in the 16 euro zone countries and clearing the way for their leaders to make the loans available at a special summit set for Brussels later Friday.

The approval represented a political victory for Chancellor Angela Merkel. Despite an unfavorable climate, she argued that Germany must participate in the $141 billion rescue fund to preserve the stability of the euro and the financial health of the 27-nation European Union.

"We must defend the stability of the common European currency," German finance minister Wolfgang Schauble declared before the vote, according to the reports from Berlin. "That is what this is all about."

But in the face of a German public largely hostile to the rescue, Merkel's stand carried risks for her party, the Christian Democratic Union, in a closely watched state election scheduled Sunday in North Rhine-Westphalia. If the ruling center-right coalition in North Rhine-Westphalia loses, Merkel's coalition could lose its majority in the upper house of parliament. Such a change would crimp her ability to govern decisively.

Germany's contribution to the loans has been set at $28 billion, which many German voters describe as an unacceptable giveaway. Opinion polls show high levels of opposition, with German voters complaining that the government has been careful to avoid excessive deficits in their own country but now has to help pay for the legerdemain and high deficits of others.

Facing that sentiment and looking ahead to Sunday's state election, Merkel initially opposed a high-priced international rescue plan for Greece. When it became apparent that Greece's financial troubles could spread to other European countries with high deficits -- and when the euro started sinking against the dollar -- she shifted gears and pushed the deal through.

Concern about the crisis in Greece, and the potential for it to spread, has prompted drops this week in financial markets worldwide.

Merkel has continued to insist that profligate European governments must rein in their spending, even at the price of cutting back popular social benefits, if the euro is to remain stable and the European Union is to live up to its commitment to limit budget deficits -- a limit endorsed by all, but often observed in the breach.

"The good European is not necessarily the one who helps quickly," Merkel said in a speech Wednesday to the Bundestag. "The good European is the one who respects European treaties and his national laws, and who brings his help without harming the stability of the euro zone."

Merkel and French President Nicolas Sarkozy issued a joint declaration Thursday vowing to preserve the value of the euro but also insisting that the European Union must strengthen its enforcement of EU budget deficit rules. Sarkozy's own government, however, has rung up deficits amounting to eight percent of France's Gross Domestic Product, nearly three times the limit set by EU guidelines.

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