Germany Says It Can’t Back Greek Bailout Plan Yet

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GREECE-EU-POLITICS-DEBT

Greek flags in central Athens.

Photographer: Aris Messinis/AFP Via Getty Images

Germany’s government withheld approval of the draft bailout plan for Greece, saying a bridge loan remains an option if a full aid program isn’t agreed in time for a payment to the European Central Bank due next week.

Euro-area governments need time to assess the preliminary accord between Greece, its international creditors and the European Stability Mechanism before possible approval of a proposed 85 billion euros ($95 billion) in aid, Finance Ministry spokesman Juerg Weissgerber said Wednesday. The ministry expects to have a position on the draft memorandum of understanding by the end of the week, he said.

“Bridge financing is not off the table,” Weissgerber told a news conference in Berlin. “We’re still taking bridge financing into consideration if it’s not possible to pay out a first tranche in August to meet the outstanding obligations.”

German Chancellor Angela Merkel’s government sees open questions regarding the International Monetary Fund’s participation in the bailout, debt sustainability and privatizations, Bild newspaper reported, citing unnamed European officials and a Finance Ministry analysis.

The ministry denied the government had rejected the program, saying in an e-mailed statement that it had “formulated questions” regarding the bailout plan as “part of the examination process.” It said those outstanding questions would be addressed at a meeting of euro-area finance ministers called for Friday in Brussels to discuss Greece.

Germany’s 30-stock DAX index extended its decline on the report, and closed down 3.3 percent.

Missing Pieces

German government officials signaled repeatedly this week they won’t be rushed into backing a third Greek bailout, which requires parliamentary approval. Last month, 60 lawmakers in Merkel’s 311-member caucus voted against even holding talks on further aid to Greece, underscoring the risks over Greece.

Foot-dragging in the biggest country contributor to Greece’s two previous bailout packages calls into question the timing of more aid rather than derailing it altogether.

It isn’t clear yet whether the bailout plan includes “a credible privatization strategy” or a “sustainable pension reform,” Weissgerber said. Germany also hasn’t seen numbers on the aid amount and Greece’s debt sustainability, he said.

Steffen Seibert, Merkel’s chief spokesman, said Wednesday it’s too early to make a full assessment of the draft agreement between Greece, the ECB, the European Commission, the IMF and the European Stability Mechanism rescue fund.

Any agreement must provide a lasting solution, not just a vehicle to help Greece meet an Aug. 20 deadline for a 3.2 billion-euro payment to the ECB, Deputy Finance Minister Jens Spahn said Tuesday.

A report by the Die Zeit weekly that Germany is suggesting the European Union provide the IMF with guarantees in case Greece can’t repay the fund was denied by the Finance Ministry.

“We must keep the IMF on board,” Weissgerber said. “But just increasing our liability, as the newspaper article says, would not be a suitable way.”

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