German Opposition Steps Up Pressure on Merkel over Greece

Posted: 11:42 pm, August 26, 2013 by Jeffrey Ely

Merkel Speaks in Bonn -- Photo: dpa / photo alliance

Berlin (dpa) - Germany’s opposition Social Democratic Party (SPD) stepped up the pressure Monday on Chancellor Angela Merkel to make a clear statement on a potential new aid package for Greece ahead of next month’s elections in Europe’s biggest economy.

Merkel’s government has “administered sleeping pills and tried to cover up that the stabilization of the eurozone will cost us something,” SPD chancellor candidate Peer Steinbrueck told the daily Suedwest Presse.

A possible third bailout for cash-strapped Greece is a sensitive issue in Germany because the nation’s taxpayers would be expected to make the biggest contribution to a new rescue plan.

Merkel und Steinbrück — photo: dpa / photo alliance

Steinbrueck said he plans to make Greece a key part of his campaign debate Sunday with Merkel in a bid to push the issue to the centre stage in the buildup to the September 22 election.

The chancellor has been hoping to keep Greece’s financial battle out of the campaign spotlight as she makes her bid for a third term, but her government has faced opposition charges that it has been trying to conceal from the German electorate plans for fresh aid to Athens.

Merkel, in comments released before a Tuesday publication, told the daily Saarbruecker Zeitung that she planned to keep up the pressure on Greece to forge ahead with its reform programme, despite the talk of a further assistance to Greece.

“I will certainly not weaken the incentive for Greece to continue to implement necessary reforms,” she said, adding that she did not know the outcome of a programme which has more than a year to run.

Merkel also once again rejected accusations that her government had not been completely open about the question of Greek aid during the election campaign.

She said that the German parliament had been informed when it approved late last year the current aid programme for Greece that it would be necessary to consider whether “very limited measures” might be necessary for Athens when the rescue plan expired at the end of 2014.

The opposition seized on remarks made last week by Finance Minister Wolfgang Schaeuble, warning that Greece would need additional help, as it tries to chip away at the commanding lead Merkel enjoys in opinion polls.

Wolfgang Schauble — Photo: dpa / photo alliance

Debt-hit Greece has so far received a total of 250 billion euros (334.4 billion dollars) under two international aid packages agreed to over the past three years.

Schaeuble confirmed Sunday that another rescue package “was highly likely,” but insisted it would be smaller than previous bailouts.

The finance minister said a prerequisite for any extra help would be that Greece fulfilled all the conditions set out in the current aid package.

However, his comments triggered a European-wide debate about further steps to help Greece shore up its finances.

Some of the help could come from a bailout fund, the European Stability Mechanism, to directly recapitalize Greek banks.

But a German Finance Ministry spokesman said Monday: “We have to see what is feasible overall.”

Greek Finance Minister Yannis Stournaras -Photo/Petros Giannakouris

Greek Finance Minister Yannis Stournaras has said in a series of media interviews that Athens would need about another 10 billion euros to help it meet its financial commitments after its current programme runs out.

Analysts said the size of a further aid package for Greece would depend on the state of the nation’s economy next year.

Greece has been stuck in a recession for six years as it battles to cut its high debt and deficit through steep cuts in public spending and economic reforms.

Stournaras said in an interview Monday with the German business daily Handelsblatt that Greece could test market confidence in the country by mounting a new government debt auction in the second half of 2014 if the country returns to an economic growth path.

The Greek finance minister joined other leading European figures, including Merkel and Steinbrueck, in rejecting a second round of debt relief for Greece.

“Debt relief that results in us being in the same situation in five years’ time would be counterproductive and would send the wrong signal to countries receiving aid,” European Central Bank governing council member Jens Weidmann told Handelsblatt.

Weidmann is also head of Germany’s central bank, the Bundesbank.