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Germany Pins Greek Aid to Budget Control as Patience Wears Thin

February 03, 2012

(For more on Europe’s debt crisis, click on EXT4.)

Jan. 30 (Bloomberg) -- Senior German lawmakers said Greece may be denied aid if it can’t keep its promises on reducing debt and refuses to give up control of its budget.

“The free lunch is over: no external controls, no money,” Michael Fuchs, the head economic spokesman for Chancellor Angela Merkel’s Christian Democratic Union in parliament, said in an interview in Berlin today. “I can’t look my constituents in the eye and say anything different.”

Greece may have little room to reject external veto rights over its budget if a report awaited this week shows it’s not on target to meet conditions for more aid, Norbert Barthle, the CDU’s budget spokesman, said.

“While we will do our utmost to keep Greece in the euro, it’s difficult to see a way forward if it keeps missing its targets,” Barthle said in an interview. “Aid is tied to strict conditions, and you pass or you fail.”

Euro-area leaders are considering policy responses to states that are “off-track” in fulfilling budget pledges while in receipt of bailouts, Finance Ministry spokesman Martin Kotthaus said at a press conference in Berlin. Proposals include prioritizing debt-cutting and supplying external advisers with decision-making powers to states in difficulty. Greece “evidently still has deficits” in its program record, he said.

‘Blind Eye’

Greece’s desultory record in keeping its fiscal promises led euro-area leaders to “turn a blind eye” last year, Michael Meister, the CDU’s top spokesman for finance, said in a telephone interview from his electoral district in the state of Hesse. “The Greek government must move forward. Period.”

The coalition lawmakers urged Greece to prepare to cede some budget sovereignty as European leaders gather in Brussels to put the finishing touches on a German-led deficit-control treaty and endorse the statutes of a 500 billion-euro ($656 billion) rescue fund to be set up this year. Greek Finance Minister Evangelos Venizelos rejected the proposals to appoint a special commissioner for the country, citing “national dignity.”

Greece’s second bailout is linked to the successful outcome of talks with private investors to accept a 50 percent writedown of debt and a favorable report on its progress in cutting spending by the external Troika group comprised of representatives from the European Commission, the European Central Bank and the International Monetary Fund. About 30 billion euros in new aid hangs on a favorable report, details of which may be released this week.

Greece may need 145 billion euros as part of a second aid package, 15 billion euros more than was agreed in October 2011, Der Spiegel magazine reported on Jan. 28, citing an unidentified official from the Troika.

--With assistance from Maria Petrakis in Athens. Editors: Angela Cullen, Eddie Buckle

To contact the reporter on this story: Brian Parkin in Berlin at Rainer Buergin in Berlin at

To contact the editor responsible for this story: James Hertling at

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