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Germany's lifeline

May 5, 2010

The German government is likely to approve Berlin's share of a 120 billion euro bailout package for Greece. But the path leading to the bailout has been rocky, and some blame Chancellor Merkel.

Angela Merkel
Merkel said a the bailout was necessary for EuropeImage: picture alliance/dpa

At the start of a day of debate in the German parliament about the European Union financial bailout for Greece, Chancellor Angela Merkel made one thing clear in an address to the Bundestag.

"This is about nothing less than the future of Europe and the future of Germany in Europe," Merkel said about the decision for Germany to back a rescue package for Greece.

Merkel has found herself needing to defend her about-face on sending help to Athens. Initially, Merkel was against a Greek bailout. However as pressure built from the rest of the European Union, Merkel changed her tune. Now, legislation to approve 22.4 billion euros ($30 billion) is up for a vote in the Bundestag. Germany's contribution is part of a three-year, 120-billion-euro bailout from the EU and the International Monetary Fund.

All of the conditions Germany had set for approving a bailout package had been fulfilled, Merkel told parliamentarians.

First and foremost was a consolidation plan for Greece to get its out-of-control budget back on track, and close behind was the involvement of the IMF, which is to contribute 30 billion euros to the total package.

Greece's daunting task

George Papandreou
Merkel said she believed Papandreou would keep his country on track with its savingImage: picture-alliance/dpa

Merkel justified her decision to hold back her approval of the bailout package until Germany could be absolutely sure Greece had met all of the pre-conditions.

"Without sufficient consideration to preconditions," Merkel said, "the expectations of other deeply indebted members of the eurozone that they would quickly receive help without their own consolidation efforts would have risen."

As public and private sector strikes continued in Greece against the government's proposed efforts to cut back spending, Merkel expressed her confidence in Athens to keep to its word.

I trust that my Greek counterpart, Prime Minster (George) Papandreou, will carry out this program, no matter how daunting it may be."

Devil in the details

Although all the parties in the German government generally agree that a bailout for Greece is necessary, not everyone is happy with how Merkel and her coalition government handled the situation.

The parliamentary party leader of the opposition Social Democrats, Frank-Walter Steinmeier, agreed that Greece was in need of German and European help. But he said his party would not agree to a blank check for Greece, citing a rift between the coalition government and the opposition on the details.

"It would be nice if there weren't galaxies and light years between the parties in such an important decision," Steinmeier added.

By continuing to put off the decision on whether or not Germany was on board with a Greek bailout, Merkel's critics say the situation was exacerbated, putting unnecessary strain on the eurozone.

A German life ring around a Greek flag
Germany is set to vote on a Greek bailout by FridayImage: Bilderbox / DW / Montage

Merkel's cold feet?

Gregor Gysi, head of The Left party in parliament, accused Merkel of repeating her performance in dealing with the global financial crisis, when Chancellor Merkel's government agreed to billions in bailouts for German-based banks.

"We told you then that debt crises could hit entire nations," Gysi said. "Now what is happening in Greece is threatening other countries, such as Ireland, Italy, Spain and Portugal. Every time, you put your hands on your lap and do nothing initially, only to turn around and make billions available later, just like back then with the banks."

The German parliament is expected to pass the bailout bill by Friday, ahead of a crucial May 9 debt deadline for Greece.

Editor: Chuck Penfold