Merkel says Greek vote 'very good news'

29th June 2011, Comments 0 comments

EU heavyweight Germany reacted with huge relief Wednesday after Greek MPs cleared the way for emergency funding to prevent a bailout, with Chancellor Angela Merkel calling it "very good news".

Amid angry street protests, MPs approved 28.4 billion euros ($40.7 billion) in spending cuts, unlocking a 12-billion-euro payout from the European Union and the International Monetary Fund.

Merkel told reporters that the vote was "both an important step for the future of Greece and for the stability of the euro".

She acknowledged that the decision had been a difficult one for Greece, but stressed there had been no other alternative.

Following the vote "we, with the European Union, stand ready to help" the financially-strapped Greek government, she added.

German Finance Minister Wolfgang Schaeuble said that the Greek parliament had "shown that it is aware of its responsibilities for the country and for the eurozone".

"Now ... a consensus has to be found on the individual measures and to implement them decisively over the coming weeks, months and years," a statement from Schaeuble said.

The funds represent the fifth tranche of a 110-billion-euro aid package agreed last year with the EU and the IMF, and are needed to prevent Greece defaulting on its mammoth debts.

Such a default could have grave consequences not only for the 17-nation eurozone, something which Germany was a driving force in creating, but also for the global financial system.

Some observers have likened its potential impact to that of the late 2008 collapse of US investment bank Lehman Brothers, the single event which more than any other triggered the world's worst financial crisis since the 1930s.

Greece's first bailout went down badly in Germany, Europe's main paymaster, with voters resentful of their taxes being used to pay for what they saw as others' mistakes and the EU becoming what critics called a "transfer union".

With Athens now looking for a second package of almost the same size, Merkel wants private investors to take part in the rescue, but there are fears that rating agencies will see this as non-voluntary and declare Greece in default.

Earlier a poll found Germans divided on whether they favoured their country contributing to a second package for Greece, following bailouts for Ireland and Portugal, with 49 percent in support and 47 percent opposed.

German Foreign Minister Guido Westerwelle also welcomed the vote, saying Athens could continue to count on the "solidarity" of its EU partners, but warned Greece to stick to its commitments.

"The new rescue package will only succeed if the measures decided upon today are fully and swiftly implemented and if the reform path is supported by all groups in society," Westerwelle said.

"This is a difficult road. But there is no alternative ... Germany and its EU partners have a great interest in the Greek economy returning to stability and growth."

Earlier Wednesday Merkel issued an appeal to lenders, a day ahead of a meeting between bankers and Schaeuble.

"If you want to be able to continue working in stable countries, then lend us a hand and do so with a modicum of goodwill," Merkel said in a speech to bankers and members of her conservative Christian Union alliance.

Josef Ackermann, the head of Deutsche Bank, Germany's largest, told the meeting the banking community was working "around the clock to find a solution".

But such aid will cost German financial institutions dearly, he added, saying that banks might have to depreciate 45 percent of their 20 billion euros in exposure to Greece.

"This will cost substantial amounts, depending on the plan that is chosen, we'll discuss that tomorrow," Ackermann said.

© 2011 AFP

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