German Lawmakers Shift Toward Extending Greek Aid

It is only a matter of time

By MARY M. LANE

Passing a more-generous bailout for Greece through Germany's parliament could prove easier than expected for Chancellor Angela Merkel, after most of her coalition appeared willing on Friday to give Greece more time and financing to repair its economy.

Senior lawmakers in Ms. Merkel's conservative-led coalition signaled that the chancellor would likely face limited resistance in parliament against an expanded aid package for Greece, belying fears that Germany's legislature would balk at a third bailout deal for Athens since 2010.

The shift in the mood in the Bundestag, Germany's lower house of parliament, makes it more likely the euro zone will agree to release urgently needed aid for Greece in November, while easing the onerous timetable of Greece's austerity program.

The German government hasn't yet agreed to extra financing for Greece. But most German lawmakers believe it is only a matter of time.

Senior Bavarian conservative lawmaker Hans Michelbach said the coalition is willing to give Greece two extra years to cut its budget deficit and extra financing to keep the floundering country afloat, provided there is a credible plan to make Greece's debt sustainable.

German lawmakers are increasingly resigned to the need for extra loans for Greece from the euro zone's bailout fund. The alternative, many in Ms. Merkel's coalition say, would be a Greek national bankruptcy and exit from the euro that could rock the currency zone just as Europe is making progress in taming its three-year-old debt crisis.

Mr. Michelbach said that reducing or delaying Greece's interest payments on its European rescue loans and helping Greece to buy back some of its outstanding bond debt were other possible measures to help Athens make ends meet. "That would be a conceivable path," he said.

Greece's deeply depressed economy, together with Athens' request for more time to implement painful overhauls, are prompting European governments to consider about €30 billion ($39 billion) of extra financing in addition to Greece's €173 billion loan program drawn up in March.

About two dozen lawmakers in Ms. Merkel's ruling coalition have signaled strong reservations against expanding the Greek bailout program, but only around 10 have so far said they would definitely vote "no." Most of them voted against previous aid deals for Greece but failed to stop them.

A major rebellion inside Ms. Merkel's coalition could embarrass and weaken the chancellor ahead of her re-election campaign in fall 2013. The expected new deal for Greece is likely to receive the backing of the opposition Social Democrats and Greens, who have fewer reservations about the move than the conservatives.

Ms. Merkel has softened her line on Greece in recent weeks, paying a high-profile visit to Athens earlier this month to signal her support for Greece's continued euro membership. She recently has expressed her sympathy for the pain that austerity measures have inflicted on Greek society, in contrast with previous rhetoric by many German politicians who have accused Greece of being resistant to change.

Pressure from other European leaders, including French President François Hollande, also has helped bring about a more-generous German stance toward Greece, says Gerd Langguth, a political scientist and biographer of Ms. Merkel.

"We live in a European society and most of Europe wants Greece," said Prof. Langguth. Ms. Merkel "doesn't want to earn an image as an ice-cold leader," he said.

Bundestag members might not be happy about bigger loans for Greece, but "nobody wants to endanger the current calm in financial markets," said Tilman Mayer, a political scientist at Bonn University. The stalwarts against aid for Greece within the coalition have been unable to attract new recruits, he says.

However, Ms. Merkel has used the threat of a Bundestag backlash to negotiate the terms of Greece's aid, Prof. Mayer said. "She had doubts whether the Greeks really understood they needed to implement reforms. She couldn't say that these funds were available without conditions," he said.

The German public remains skeptical about Greece's future in the euro. Only 48% of Germans think Greece should stay in the currency, according to a survey released by German broadcaster ZDF on Friday.

Germany's mass-circulation tabloid Bild, a critic of euro-zone bailouts, has accused the governing coalition of lying to the public. On Thursday, Bild published a parody of a Brothers Grimm fairy tale, listing quotes from German politicians promising there would be no more aid for Greece.

Rainer Brüderle, parliamentary leader of Ms. Merkel's junior coalition partners the Free Democrats, had insisted Greece wouldn't be allowed extra time to cut its deficit, Bild pointed out. This week, Mr. Bruderle told the Rheinische Post newspaper that "we can speak about a time extension for meeting the deficit requirements" if Greece has agreed on necessary overhauls with inspectors from its international creditors.

"I'm not going to vote for it," said Frank Schäffler, a Free Democrat lawmaker who has voted against every previous Greek aid measure. But he is resigned to other coalition members, including the chancellor, granting Greece more money despite their past promises. "That's how politics works. People say pretty things," he says.