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Greece deal

May 7, 2010

The German parliament has approved the country's contribution to a European Union aid deal for debt-laden Greece. The Bundesrat upper house has also approved the multi-billion pound rescue package.

Chancellor Angela Merkel
Merkel's Bundestag majority helped push through the aid dealImage: picture alliance/dpa

Germany's parliament has approved an aid package worth 22.4 billion euros ($28.4 billion) for eurozone partner Greece. The funds are to be paid out over the next three years as part of an EU financial aid deal for Athens.

The legislation allowing Berlin's pledge was subject to debate in the lower house, the Bundestag, early on Friday ahead of a vote in the upper house, the Bundesrat, which also approved the package.

The Christian Democrat-Free Democrat coalition government won support from the Green party, while the opposition Social Democrats (SPD) abstained.

Chancellor Angela Merkel praised the vote as an important step for the stabilization of the euro and reiterated the importance of a "demanding austerity program" in Greece for it to be effective. She expressed regret that the SPD had not voted in favor of the measures.

"I find it regrettable that in such a serious political situation the Social Democrats, unlike the Greens, have not been able to bring themselves to say yes," said Merkel.

An Athens street on Wedesday during demonstrations
Protests in Greece have been violentImage: AP

The German aid is part of a 110-billion-euro rescue package to be provided jointly by the EU and the International Monetary Fund over the next three years to help stabilize the Greek economy and alleviate its huge mound of debt. Germany is the largest contributor to the EU package.

The money is to be provided by the state-owned KfW bank. Around 8.4 billion euros is to be made available for 2010.

'Devastating' consequences

Finance Minister Wolfgang Schaeuble warned during the Bundestag session that inaction on Greece would have dangerous consequences.

"It would be devastating to even risk a chance of Greece, a member of the eurozone, going bankrupt," he told the parliament. "We have to reject any ideas of Greece (attempting to pay off its own) debts if we want any chance of preserving the stability of our common currency."

The parliamentary go-ahead had been expected as the coalition government of Chancellor Angela Merkel enjoys a strong majority in the parliament. However, the German contribution has been deeply unpopular on the streets, and Merkel has had to work hard to convince ordinary Germans that Greek stability was important for the stability of Europe.

President Nicolas Sarkozy, left and Chancellor Angela Merkel
Sarkozy and Merkel have presented a united frontImage: AP

As a precondition to the deal, the Greek government has had to push through a tough austerity program, which includes spending cuts totaling 30 billion euros. The program has led to widespread demonstrations and strikes across Greece. Three people died in Athens on Wednesday after rioters set fire to a bank.

French support

Later on Friday, Merkel is to meet with other eurozone leaders in Brussels in a bid to finalize the Greek rescue deal and address the long-term future of the European single currency.

Earlier in the day, the French parliament approved its contribution of 16.8 billion euros ($21.2 billion) for the Greek aid deal.

As much as 3.9 billion euros of the French contribution is to be made available this year. The aid deal passed the parliamentary vote with broad backing from both the ruling center-right party of President Nicolas Sarkozy and the opposition Socialists.

Speaking on Canal Plus television, Finance Minister Christine Lagarde reiterated that "Greece is part of the eurozone, so we are all together in the same boat."


Editor: Martin Kuebler