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German parliament approves new bailout for Greece

Text by News Wires

Latest update : 2012-02-27

The German Parliament gave its overwhelming backing on Monday for a €130 billion rescue package to save Greece from bankruptcy. Chancellor Angela Merkel is now expected to ratify the second bailout at an EU summit in Brussels this week.

German lawmakers voted overwhelmingly Monday to endorse a second multi-billion euro lifeline for Greece after Chancellor Angela Merkel warned failure to act would run incalculable risks.

Deputies voted by 496 to 90, with five abstentions, to approve the eurozone deal to hand Athens another 130 billion euros ($175 billion) ahead of a key EU summit later this week to ratify the package.

"The risks of turning away from Greece now are incalculable," Merkel told the 591 lawmakers of the Bundestag lower house who had gathered for a special session to vote on the Greek package.

"No-one can assess what consequences would arise for the German economy, on Italy, Spain, the eurozone as a whole and finally for the whole world" of a Greek bankruptcy, she added.

But Merkel acknowledged that Greece faced a path ahead that was long and not without risk, adding: "That goes also for the success of the new programme. Nobody can give a 100-percent guarantee of success."

The Bundestag vote was not in doubt after two of the three opposition parties vowed to support it but it was done with some reluctance.

"It's not an easy decision," Gerda Hasselfeldt, of the Christian Social Union, the Bavarian sister party of Merkel's Christian Democratic Union, said, warning that solidarity was not "unlimited."

Despite the motion's approval, German scepticism about Greece remains.

"The Bundestag will in the foreseeable future be dealing with a third (rescue) package for Greece," said SPD member Peer Steinbrueck, a former finance minister, adding that to really stabilise Greece, strong growth was needed.

"Billions for Greeks. STOP!" the mass-circulation Bild headlined on its front page Monday.

A majority of Germans oppose giving more aid to Greece, a poll by the Emnid institute for Bild am Sonntag newspaper showed, with 62 percent saying the Bundestag should vote 'No' while 33 percent called for its approval.

Prior to the vote, German Interior Minister Hans-Peter Friedrich had caused a stir by saying Greece should be given "incentives" to leave the eurozone so it could then better put its fiscal house in order.

While stressing he did not mean Greece should be kicked out of the 17-nation bloc, his comments to news weekly Der Spiegel fly in the face of the government's repeated wish for Greece to remain in the eurozone.

For Merkel, it was important on the domestic political front that she garnered enough support from within her own camp to pass the motion without the humiliation of having to rely on opposition votes.

Seventeen members of her centre-right coalition of CDU and Free Democrats defied her, with three abstentions, compared to the figures for 'rebels' in September and October votes of 15 and 14 respectively.

The latest package for Athens, hammered out by eurozone finance ministers last week, will come from the eurozone's current bailout fund, the EFSF, and does not require the stumping up of fresh funding.

Germany, Europe's biggest economy and effective paymaster, came under renewed pressure at a G20 weekend gathering in Mexico to agree a bolstering of the eurozone's defence funds, the EFSF and its successor, to 750 billion euros.

Berlin believes that with calmer market conditions and lower bond yields for Spain and Italy, the risk of debt crisis contagion is lower and the pressure to bolster the zone's defences has lessened.

"The government sees at present no necessity for a debate on the increase of the capacity" of the eurozone's bailout funds, Merkel told parliament.

But she said it would first be necessary to see the results of a Greek operation to write-down nearly a third of its debt before making a final decision on the issue.

Under the EU plan for Athens, Greece would receive up to 130 billion euros in direct loans by 2014 in return for tough new austerity measures and tighter EU-IMF oversight of its economy.

A private creditor bond writedown is worth another 107 billion euros.

Date created : 2012-02-27


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