Photo: AP Images
BERLIN (AP) — The German parliament has approved a €130 billion ($173 billion) loan package for Greece after Chancellor Angela Merkel warned it would be irresponsible to abandon the country to bankruptcy.Parliament voted 496-90 with five abstentions for the new package on Monday. A wide majority was expected, with two opposition parties in favour, although bailing out Greece has never been popular in Germany.
The rescue is Greece’s second in less than two years and also involves private-sector investors accepting big losses the bonds they hold, along with tough new Greek austerity measures.
Merkel told lawmakers before the vote that “no one can give a 100 per cent guarantee of success” for the rescue program.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
BERLIN (AP) — Chancellor Angela Merkel urged German lawmakers to support the new Greek bailout package on Monday, warning it would be irresponsible to abandon Greece to bankruptcy although there is no “100 per cent guarantee” that the rescue plan will succeed.
Merkel addressed Parliament ahead of a vote on a €130 billion ($173 billion) bailout. It was expected to win wide approval, with two opposition parties in favour — although bailing out Greece has never been popular in Germany, either with the public or with many politicians.
The rescue package is Greece’s second in less than two years and also involves private-sector investors accepting total losses of over 70 per cent on the bonds they hold, along with tough new austerity measures.
“The road that lies in front of Greece is long and truly not without risk,” Merkel told lawmakers. “That also goes for the success of the new program — no one can give a 100 per cent guarantee of success.”
Earlier Monday, the mass-circulation Bild daily, which has always taken a very hard line on Greece, plastered the word “STOP!” over its front page. Its message to lawmakers was: “Don’t keep on going the wrong way.”
Merkel, however, said it would be irresponsible to risk a Greek bankruptcy.
She acknowledged that some people are asking “whether Greece isn’t a bottomless pit, a hopeless case, whether it wouldn’t be better for all if Greece reintroduced the drachma.”
But she insisted that “the opportunities outweigh the risks of turning away from Greece now — I believe these risks are incalculable and therefore irresponsible.”
“As chancellor of Germany, I should and sometimes must take risks, but I cannot embark on adventures,” Merkel said.
It isn’t yet clear exactly what Germany’s share will be of the new bailout.
Greece has been surviving since May 2010 on an initial €110 billion ($148 billion) package of rescue loans from other eurozone countries and the International Monetary Fund.
The IMF’s input this time has yet to be determined. But Merkel said “it is indispensable for the German government that the IMF continue to make a significant contribution and provide its experience and expertise.”
Several non-European members of the IMF, such as the U.S., are reluctant to boost the IMF’s resources for troubled eurozone nations, saying the region’s bailout funds should be increased in size first.
Merkel made clear that she is holding out against the mounting pressure for a quick decision on beefing up the permanent €500 billion ($671 billion) rescue fund, the European Stability Mechanism.
“The government currently sees no need for a debate on increasing the capacity” of the ESM and the existing interim bailout fund, she said.
But she underlined Germany’s willingness to speed up its planned payments of capital into the ESM, saying that Berlin could pay in the first half — €11 billion ($14.8 billion) — this year and the rest next year.
An often suggested route toward expanding the ESM is keeping the remnants of the existing interim fund, the €440 billion ($590 billion) European Financial Stability Facility, available once the ESM starts work in July.
German officials are noncommittal, pointing repeatedly to an existing agreement to review the ESM’s size by the end of March.
Merkel insisted that ending the crisis will be a gradual, step-by-step process that will “require years” to complete.
“It was always Germany and the German government that warned again and again the illusion of fast and simple solutions,” Merkel told lawmakers. “We continue to warn against that.”
Opposition Social Democrat Peer Steinbrueck shot back that “this strategy of buying time has failed because times have got worse.”
Underlining unease in Merkel’s centre-right coalition, the weekly Der Spiegel on Sunday quoted Interior Minister Hans-Peter Friedrich as arguing that Greece would have better chances of “regenerating and becoming more competitive” outside the 17-nation eurozone.
“I’m not talking about throwing Greece out, but about creating incentives for an exit that they can’t refuse,” he added, according to the report.
But Friedrich said Monday that he would back the second bailout and insisted he had only been talking about “what alternatives there are if the possibility of making Greece competitive inside the euro were to fail.”
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