Bloomberg News

Merkel Lawmakers Soften IMF Demands as Bundestag Prepares for Greek Vote

February 27, 2012

Lawmakers from German Chancellor Angela Merkel’s coalition tempered a call on the International Monetary Fund to shoulder one-third of the costs of a new Greek bailout, urging the fund to help “as far as possible,” as the Berlin parliament prepares to vote on the aid this evening.

The appeal to the IMF to share the 130 billion-euro ($174 billion) package comprises one of four non-binding demands in a resolution signed by the leaders of the three coalition parties ahead of the ballot. The Bundestag, or lower house, will vote on the aid at 6 p.m. As a condition of support, coalition lawmakers “expect” Merkel to abide by their requests, a one-page resolution states.

The coalition expects “that the IMF, as far as possible, continues to play a financial role in the program” for Greece, according to the resolution, a copy of which was obtained by Bloomberg News. The lawmakers also demand that Germany withholds aid for Greece until it fully meets the terms of the bailout, appeal for German support to revamp the Greek economy, and ask that lawmakers be adequately informed about crisis developments.

The IMF is holding out with details on the size of its commitment to the second rescue package for Greece, opening a potential gap in funding that Germany, the euro-area’s single biggest contributor to the aid, may be reluctant to fill.

Coalition Stir

While opposition parties will probably help Merkel gain a majority in today’s vote, comments by Interior Minister Hans- Peter Friedrich that Greece would have better chances of overhauling its economy and restoring growth if it left the euro area caused a stir in her coalition.

Friedrich, a member of the Bavaria-based Christian Social Union that’s allied with Merkel’s larger Christian Democratic Union, is her first Cabinet member to suggest Greece’s exit from the euro, in an interview with Der Spiegel released on Feb. 25. Volker Kauder, the parliamentary leader of Merkel’s Christian Democratic bloc, countered by saying Germany doesn’t want to force Greece out of the euro area, in an interview with ARD television.

Sixty-two percent of Germans want lawmakers to reject renewed aid for Greece in the parliamentary vote, Bild am Sonntag newspaper reported yesterday, citing a poll.

Hopes Dashed

Germany’s hopes of winning the support of the Group of Twenty states to build up the euro area’s permanent rescue fund via the conduit of the IMF were dashed at a meeting of the group in Mexico City at the weekend, shoring up a risk that the currency area needs to dig deeper to payroll the stability of the euro.

The G-20 meeting concluded that a European review of its financial firewall in March is “essential” before any consideration can be made to boost resources for the IMF, the G-20 said in its closing statement issued yesterday. Progress will be assessed in April, when officials gather in Washington for the IMF’s spring meetings.

Germany has signed up for 21.5 billion euros of 80 billion euros in a so-called “paid-in” cash reserve of the 500 billion-euro European Stability Mechanism. German lawmakers will resist any calls to increase the country’s financial input into the fund, Christian Democrat budget spokesman Norbert Barthle said in an interview on Feb. 24.

In today’s vote on a new financial lifeline for Greece, Merkel can count on the support of the opposition Social Democrats and Greens as well her own coalition, Barthle said. Merkel needs a simple majority. Her coalition has 330 seats in the 620-member lower house. Finnish and Dutch lawmakers are also due to vote on the bailout this week.

To contact the reporter on this story: Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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