Merkel Lawmakers Attach Conditions to Greek Aid Package, Reject Bigger ESM

Lawmakers from Chancellor Angela Merkel’s coalition want to tie German support for Greece’s second bailout to conditions, including the completion of a debt swap by private investors, when they vote on the plan in parliament on Feb. 27.

Members of the governing parties are drafting a measure intended to press Greece to fulfill commitments under the 130 billion-euro ($175 billion) aid package agreed by euro-area finance ministers on Feb. 20, Free Democratic lawmaker Otto Fricke said today. Lawmakers are also demanding clarity on the International Monetary Fund’s share of the bailout, he said.

“We need assurances on these points,” Norbert Barthle, the budget spokesman in parliament for Merkel’s Christian Democrats, said in an interview. “We will say that the German parliament can approve aid only with the proviso that these conditions are met and bound by Greek law.”

By taking a firm stand on Greece, lawmakers may strengthen Merkel’s position at a two-day meeting of European Union leaders, starting on March 1. The chancellor is scheduled to address parliament in Berlin hours before traveling to the summit and to meet other leaders of the 17-nation euro area for separate talks in Brussels on March 2, German government spokesman Steffen Seibert said today.

‘No Guarantees’

German parliamentarians are likely to back aid for Greece because two opposition parties, the Social Democrats and Greens, intend to support the government, Barthle said. Merkel’s coalition of Christian Democrats and Free Democrats has 330 seats in the 620-member lower house, or Bundestag. Finnish and Dutch lawmakers are also due to vote on the bailout next week.

“There are no guarantees that the path being taken will lead to success,” Finance Minister Wolfgang Schaeuble said in a letter to lawmakers dated Feb. 23. “It may also not be the last time the German Bundestag has to consider financial aid for Greece.”

The draft resolution by coalition lawmakers reflects German weariness at contributing the most of any country to bailouts for Greece, Ireland and Portugal and the government’s reluctance to expand Europe’s backstop for future fiscal emergencies beyond its 500 billion-euro ceiling.

German Limits

Calls to strengthen crisis defenses by combining Europe’s temporary and permanent rescue funds have come from European Central Bank Executive Board member Joerg Asmussen and IMF head Christine Lagarde. The March 1-2 summit will deliver a “significant reinforcement of the euro-area firewall,” Luxembourg Prime Minister Jean-Claude Juncker, who chairs the region’s group of finance ministers, said on Feb. 21.

Germany’s engagement has limits,” the parliamentary draft resolution says. It urges Merkel to resist calls for joint euro-area bonds and warns that taking on additional risks for the sake of European solidarity must “always” be weighed against “the sustainability of our own state finances.”

“Fatigue is setting in in Germany,” Fricke said. Sixty- six percent of Germans question Greeks’ willingness to endure austerity, and 46 percent say the country should default, according to a Feb. 7-9 FG Wahlen poll for ZDF television.

Germans tend to interpret the difficulties of debt-stricken countries in reducing their deficits as a “lack of will,” Ulrike Guerot and Sebastian Dullien, analysts at the London- based European Council on Foreign Relations, said in a paper published today. “Bailouts are seen as a genuine threat. Rescue packages are, at best, a necessary evil.”

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net Tony Czuczka in Berlin at aczuczka@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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