Merkel Is Pressed by Opposition to Enlist Banks in Greek Rescue Financing
German lawmakers considering a bill to aid Greece challenged Chancellor Angela Merkel to involve banks in the rescue, refusing to back down after her government said that would send a “fatal signal” to markets.
The main opposition Social Democratic Party threatened to withhold support for aid next week when the bill is fast-tracked through parliament unless banks are asked to contribute. Members of Merkel’s Christian Democrats said the government should ask banks to voluntarily accept losses on their investments.
Talks “should at least be held” with all investors in Greek bonds, Leo Dautzenberg, parliamentary finance spokesman for Merkel’s CDU/CSU bloc, told reporters in Berlin today. Norbert Barthle, a fellow CDU lawmaker, said yesterday that he favors involving the “private sector” in a bailout.
Growing support for asking banks to help shoulder a bailout of at least 45 billion euros ($60 billion) this year poses a dilemma for Merkel as she campaigns for May 9 elections in North Rhine-Westphalia, Germany’s most populous state. Almost two- thirds of Germans want banks to participate in a rescue, a poll showed today.
The government may reverse its opposition and ask banks to help contribute to a Greek rescue, Deutsche Presse-Agentur reported, citing unnamed government sources. Government officials plan to meet this weekend with representatives of German banks that have invested in Greece to discuss their participation in a rescue, DPA said. The government refused to comment on the report.
Finance Minister Wolfgang Schaeuble stepped up his opposition to bank involvement yesterday, saying that debating such a move risked creating “the misunderstanding in financial markets that we’re not talking about ensuring the solvency of Greece.”
“This would create a fatal signal that would cause markets to explode completely,” Schaeuble said in an interview on ZDF television.
European Central Bank President Jean-Claude Trichet and Dominique Strauss-Kahn, managing director of the International Monetary Fund, told lawmakers in Berlin yesterday that the move would “undermine market confidence so much” that a Greek bailout would “take longer and cost that much more,” a German politician who was briefed by the officials said.
Strauss-Kahn and Trichet made it clear they’re “not doing such a restructuring at this time,” Hans-Peter Friedrich, the parliamentary leader of Merkel’s CSU Bavarian allies, said today in a radio interview on Deutschlandfunk. “Right now, they reject it.”
Pending a successful outcome of aid talks in Athens between Greece and the IMF, ECB and European Union, Merkel’s Cabinet can agree on a bill to go to parliament on May 3 that would come before the upper house for approval on May 7, Schaeuble said. Foreign Minister Guido Westerwelle today canceled a trip to the United Nations in New York to remain in Germany for talks on Greece, Deutsche Presse-Agentur reported.
A draft bill circulated to lawmakers and dated April 27 asks lawmakers to approve 8.4 billion euros in aid for Greece for this year and unspecified further amounts for “the following two years.”
“Germany will help as soon as the conditions are right,” Merkel said in a speech in Berlin today, citing a “sustainable, credible and unsparing” deficit-reduction plan for Greece. “There’s no alternative to this path.”
While polls consistently show German voters oppose funding a Greek rescue, 62 percent of 1,000 respondents to an Emnid poll for N24 television today said they want banks to share in the Greek recue. Just 19 percent said they believe the Greek government would repay the loans, which are to be provided by Germany’s state-owned KfW development bank. The poll was conducted yesterday. No margin of error was given.
As Merkel left to campaign in North Rhine-Westphalia, where she has two appearances later today, opposition lawmakers reiterated their calls to make banks help pay for Greece.
Merkel’s government committed “a grave mistake” by ruling out their participation, Gerhard Schick, the Green Party’s ranking member on parliament’s finance committee, said in an interview.
The Social Democrats “support fast-track handling of aid through parliament, but that doesn’t necessarily mean we’ll vote to approve the aid,” Carsten Schneider, the party’s budget spokesman, said in an interview. “There will be conditions.”