Merkel cabinet approves Greek aid

4th May 2010, Comments 0 comments

Chancellor Angela Merkel's cabinet gave approval on Monday to Germany's unpopular contribution to a debt rescue for Greece, dubbed the "fattest cheque of all time" by the mass-circulation Bild daily.

Merkel aims to rush the legal framework for Germany's slice of the 110-billion-euro (146-billion-dollar) package, amounting to 22.4 billion euros over three years, through an accelerated parliamentary procedure by Friday.

In the teeth of public opposition and with a key regional election looming, Merkel has been seen as cautious to helping out Greece, but stated on Sunday that the bail-out was "the only way to ensure the stability of the euro."

She was expected to make a further statement at 1245 GMT.

Merkel has enough support to push through the legislation without the help of opposition parties, but the centre-left Social Democrats (SPD) seemed to be leaning towards supporting the bill, as did the Greens.

The European Commissioner for Economic and Monetary Affairs, Olli Rehn, met SPD leaders on Monday and said after talks that he could "count on the support" of the party in a vote in parliament on Friday.

And the co-head of the Greens, Claudia Roth, told rolling news channel NTV that "there is no alternative to European solidarity ... there must be support" for aid to Greece.

Market analysts saw little risk of the legislation being blocked.

Dirk Schumacher from Goldman Sachs said: "While there can be little doubt that many MPs do not like the package at all, things have progressed too far to be stopped now in our view."

"We see only a very small risk that the financial help will be stopped by parliament."

However, public opposition to bailing out Greece remains strong, with the most recent poll, on Sunday, showing 56 percent of people believe handing aid to Athens is wrong. Just 39 percent were in favour.

In a bid to soothe opposition, German officials have stressed taxpayers' euros are not on the line, saying loans to Greece would come from the state-owned development bank, the KfW, with Berlin offering loan guarantees.

Finance Minister Wolfgang Schaeuble told mass circulation daily Bild on Monday: "I am confident that there will be no damage for the German taxpayer if the programme is fully implemented."

And a top economist also rode to the government's aid Monday, saying that German taxpayers could even make a profit on the deal.

"We have a good chance of seeing the money again," Michael Huether, head of the influential IW economic institute, told the Hamburger Abendblatt daily.

"At the end of the day, we could get five percent on the money we have handed out and we ourselves only paid three percent for it. In the longer-term, the rescue package should not impact the taxpayer," he added.

Nevertheless, the government is also bracing itself for a likely challenge in the constitutional court, Germany's highest, from academics who campaigned against the creation of the euro in the first place.

On Sunday, eurozone nations agreed to offer a loan package to Greece worth 110 billion euros over three years, with the IMF providing 30 billion euros.

And next Sunday, Merkel, who won a second term in September, faces voters from Germany's most populous state, North Rhine-Westphalia, in an election that could see her coalition lose its majority in the upper house.

© 2010 AFP

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