German parliament due to back Greek debt deal

Feb 27, 2012, 7:01 GMT

Berlin - The German parliament appeared set Monday to give its resounding support to a 130-billion-euro (174.4-billion-dollar) bailout for debt-stricken Greece, despite the prospects of several members of Chancellor Angela Merkel's government voting against the plan.

The vote in the lower of house of the German parliament, the Bundestag, comes ahead of a European Union summit that is expected to discuss expanding the bloc's permanent 500-billion-euro eurozone bailout fund, which is known as the European Stability Mechanism (ESM) and is due to begin operating in July.

Berlin has been resisting calls from its European partners and leading international organizations such as the International Monetary Fund to boost the firepower of the ESM.

The current fund, known as the European Financial Stability Facility (EFSF), holds 250 billion euros.

The Greek bailout on which German lawmakers were due to vote is the second in as many years.

However, German Finance Minister Wolfgang Schaeuble has already warned that a third rescue package might be necessary to ensure Greece meets its financial commitments and to help it cut its public debt to 120 per cent of gross domestic product by 2020.

The opposition Social Democrats (SPD) and Greens, which were expected to side with the government in Monday's vote, have also began talking about a possible third rescue package for Greece worth about 50 billion euros.

If a third rescue plan of this order of magnitude were to be necessary, it would bring the total amount paid out to Greece since May 2010 to about 300 billion euros.

During Monday's discussions on the second rescue plan, German lawmakers were expected to make Berlin's approval conditional on Greece delivering on the tough round of measures it has agreed to, including restructuring government debt held by private investors.

Germany, which is the biggest contributor to the eurozone bailout fund, is one of several eurozone states where the Greek bailout is to be considered by parliament.

While Monday's outcome was a foregone conclusion thanks to the backing of most pro-government and opposition lawmakers, there were signs that up to 11 members of Merkel's coalition might vote against the bailout. This is slightly less than the number of rebels who refused to toe the party line on past euro bailout measures.

According to a recent survey of lawmakers conducted by the daily Rheinischen Post, eight members of Merkel's conservative Christian Democrat bloc plan to vote against the rescue package, along with three from the junior coalition partner, the Free Democrats.

This in part reflects widespread scepticism among many Germans about whether Greece has the resolve to follow through with the tough medicine it has signed off on.

One recent poll showed that two-thirds of Germans doubt Greece's commitment to undertaking the necessary savings needed to knock their country's finances into shape.

In an interview published in this week's German magazine Der Spiegel, German Interior Minister Hans-Peter Friedrich became the first member of Merkel's cabinet to speak out in favour of Greece leaving the eurozone.

Friedrich, who is a member of the Christian Social Union (CSU), said Greece would have better prospects of knocking its state finances into shape and boosting economic competitiveness outside the euro. The CSU is the Bavarian sister party of Merkel's Christian Democrats.

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